02 February 2016 Ways and Means economy hearing focuses on tax reform The House Ways and Means Committee hearing on February 2, 2016, on "Reaching America's Potential: Delivering Growth and Opportunity for All Americans" largely focused on the benefits of international tax reform that the Committee plans to pursue this year. Chairman Kevin Brady (R-TX) has been making his plans for acting on international tax reform known, saying yesterday following a Committee retreat, that Tax Policy Subcommittee Chairman Charles Boustany (R-LA) is tasked with developing the proposal, though there is no timeline for Committee action. "We are going to advance international tax reforms because that is an immediate threat to our economy today," he said during a separate Heritage Foundation speech yesterday. — Kevin Hassett, State Farm James Q. Wilson Chair in American Politics and Culture, resident scholar, Director of Economic Policy Studies, American Enterprise Institute In testimony, Holtz-Eakin called for tax reform, pro-growth trade agreements, reversing the Affordable Care Act (ACA), and making social safety net programs more "pro-work." Hassett noted the degree of agreement in academic literature that "current corporate tax policy in the U.S. is quite harmful, and that lowering corporate taxes would likely increase growth." Moore called for Congress to vote soon to cut corporate taxes, provide immediate expensing, and allow for repatriation of foreign earnings at a low rate. Bernstein said the ACA has been "remarkably successful," and argued for two criteria in considering tax policy changes: making the tax code more effective at reducing wealth inequality and ensuring ample revenues with respect to fiscal obligations, meaning revenues will likely need to be increased due to demographic pressures alone. During questioning from Chairman Brady about the urgency to act now to incentivize companies to remain in the United States, Moore said that while the tax code in the late 1980s and early 1990s was competitive, the rest of the world has since been racing to cut their corporate tax rates as fast as possible. "If the United States does not take action in the next couple of years, more American companies will be lost to other countries," he said. Asked by Chairman Brady whether the Committee should seek to set the corporate tax rate in the middle of the pack, Moore said the rate should be reduced to 15%, in addition to the other changes he is seeking. Brady has previously said he would like to set the statutory corporate rate at under 20%. Rep. Boustany noted pressure on US-based companies from the OECD BEPS project and European Commission State aid investigations, saying that international tax reform must be done with a sense of urgency or the nation will continue to lose major US-headquartered companies along the lines of the inversion transactions announced recently. Several Democratic members expressed concern about any tax changes that would increase the deficit in light of the year-end legislation that made permanent several tax extenders provisions without offsetting the cost. Rep. Lloyd Doggett (D-TX) said the year-end bill was a massive tax cut demonstrating that while many members want to cut taxes, they do not want to offset the cost, which he expects will be true for international tax changes the Committee will consider. He asked witnesses whether they would support an exit tax on inverting companies? Like that which applies to individuals who expatriate, an idea that has been proposed by Democratic presidential candidate Hillary Clinton. Bernstein said the exit tax is a useful idea to build on Treasury's efforts to curb inversions. Rep. Mike Thompson (D-CA) said the "fact that we are even discussing going down the road of passing more tax cuts that are unpaid-for is frightful" in light of the massive year-end tax package that will add to the debt and become "a greater drag on the economy." Some Democratic members raised other issues that could benefit the economy, including relief from student loan debt and an increase in the minimum wage. In response to a question from Chairman Brady about tax changes to ensure access to health care and improve the economy, Holtz-Eakin urged the Committee to look at all the taxes in the ACA, in particular the future of the Cadillac tax. "It's not very good tax policy. It's very complicated and onerous to comply with," he said. Holtz-Eakin said the Committee ought to consider alternatives to end an open-ended tax subsidy for health insurance, perhaps through a cap on the exclusion, a tax credit, or other cost control incentive.
Document ID: 2016-0231 | |||||
