22 April 2016 EY Center for Tax Policy: This Week in Tax Reform for April 22 Business tax reform hearing: The Senate Finance Committee will hold a hearing on "Navigating Business Tax Reform" on April 26 (at 10 a.m.). "As the Finance Committee continues to lay the groundwork for a comprehensive tax overhaul, we should explore policies that will make America the best place for business and job creation," Chairman Hatch said in announcing the hearing. "Be it through leveling the playing field on the taxation of business income, lowering the corporate rate or removing complexity and encouraging certainty in the code, more must be done to make the tax system for America's job creators, including our valued pass-through entities, competitive in today's global economy. With this hearing, I look forward to examining these options and those included in the bipartisan business tax working group's findings as we chart the path towards tax reform." A Joint Committee on Taxation discussion of present law and data relating to the taxation of business income and business entities prepared for the hearing is linked here. Witnesses at the hearing will be: — Mr. Thomas A. Barthold, Chief of Staff, Joint Committee on Taxation, Congress of the United States, Washington, DC — Dr. James R. Hines, Jr., L. Hart Wright Collegiate Professor of Law and Richard A. Musgrave Collegiate Professor of Economics, University of Michigan, Ann Arbor, MI — Dr. Eric Toder, Institute Fellow, Co-director, Urban-Brookings Tax Policy Center, Urban Institute, Washington, DC Wyden depreciation proposal: Also the week of April 25, Senate Finance Committee Ranking Member Ron Wyden (D-OR) is planning to unveil a "mass asset depreciation" proposal to simplify depreciation rules. Atlantic event: On April 27 (at 9 a.m.), The Atlantic will hold its 5th annual Summit on the Economy, with tax reform expected to be addressed. Speakers include Chairman Brady and Jason Furman, Chairman of the White House Council of Economic Advisors. Hatch floor speech: On April 21, Finance Committee Chairman Orrin Hatch (R-UT) delivered a Senate floor speech saying that inversions should be addressed through tax reform, not the regulatory approach taken by the Administration. He cited the United States tax system as having the highest corporate tax rate in the developed world and punishing multinationals by taxing their repatriated foreign earnings. "It is these factors — not a lack of appropriate regulation by the government or a shortage of 'economic patriotism' on the part of American businesses — that make foreign countries more attractive destinations for American companies," Chairman Hatch said. Inversions aside, the current system makes US companies attractive targets for foreign takeovers, Chairman Hatch said, citing an EY study finding that the US economy suffered a net loss of $179 billion in business assets to foreign buyers in the decade between 2003 and 2013 and that a reduced corporate tax rate would have greatly reduced and possibly eliminated such losses. Hatch said there was a "glimmer of hope" with the findings and recommendations of the Finance Committee's bipartisan International Tax Reform Working Group last year, though "as is far too often the case, that glimmer of hope may very well be overtaken by the politics of the moment." The working group's co-chairs, Sens. Rob Portman (R-OH) and Chuck Schumer (D-NY), endorsed a move toward a territorial system with anti-base erosion rules, a patent box, and a one-time "deemed repatriation" at a reduced tax rate. Hatch described the President's Framework for Business Tax Reform as "nebulous" and a "vaguely worded wish-list" of tax proposals that has no serious potential for bipartisanship and would not discourage companies from moving offshore. He said he is still working with the Joint Committee on Taxation to finalize the details of his corporate integration proposal, the basic idea behind which is "to streamline the taxation of business income and eliminate instances in which profits and earnings are subject to multiple layers of taxation at the company and shareholder levels." Chairman Hatch has said elsewhere that he now expects to unveil the plan in June. Brady on tax reform: In an interview with The Daily Caller News Foundation published April 18, House Ways and Means Committee Chairman Kevin Brady (R-TX) continued to draw parallels between the current tax reform effort and the 1986 Act enacted under President Reagan, which he has previously praised for its formula of lower rates combined with base broadening. "[The reform effort] seems to be mirroring a time leading up to the Reagan tax reform. You had three really key elements, one we had an American public who [were] sick and tired of the tax code, it was too complicated to follow — everyone got a tax break but them, they were ready for a change and that's where we're at," Brady said. "Secondly, we have good ideas bubbling up from members of Congress, in that case Jack Kemp and Bill Bradley and others, in this case we have fair taxes and flat taxes and cash flow taxes and Reagan-style reforms as well as the Camp drive — we mirror that. Chairman Brady said the third element leading to the 1986 Act was presidential leadership, which Republicans have widely said is lacking in the current environment. "[W]e're anxious for a new president in 2017, everything we are doing right now is focused toward that reform in 2017," he said. JEC hearing: During an April 20 Joint Economic Committee hearing titled "Is Our Complex Code Too Taxing on the Economy?" witness Art Laffer was asked about his recommendations for current tax reform efforts in light of his experience working with President Reagan. Laffer — who in testimony recommended a low rate flat tax on a broad base, which he said would reduce complexity — said the lowest possible tax rate is desirable "to provide people the least incentives to evade, avoid or otherwise not report taxable income." Senator Amy Klobuchar (D-MN), a member of the Committee, said she is "interested in corporate tax reform and trying to bring that money from overseas and creating consensus, but, however, we're kind of stuck." Another witness, Scott Hodge of the Tax Foundation, advocated replacing the current cost recovery system with full expensing for capital investment. Finance approves ID theft, taxpayer bills: On April 20, the Finance Committee approved by voice vote a bill to curb identity theft and tax refund fraud, and the separate Taxpayer Protection Act of 2016. The ID theft bill was modified from the version scheduled for markup last September to remove language that would provide Treasury and the IRS authority to regulate paid tax return preparers. A group of Committee Democrats were unsuccessful in adding back in language to provide Treasury authority to develop and impose minimum standards for paid tax return preparers, but to leave the IRS out of the process. A Chairman's modification to the Taxpayer Protection Act of 2016 added provisions to clarify that the IRS Commissioner has the power to fire senior executives who have failed in their performance or committed serious misconduct, to bar IRS from delegating to third-party contractors the authority under section 7602 to examine books and records, summons persons, or take sworn testimony related to a tax matter, and to broaden a Government Accountability Office study concerning the opportunity for a hearing by the IRS Office of Appeals to include an examination of taxpayers' access to Appeals. It also included a provision to prohibit IRS from rehiring former employees who were involuntarily separated for misconduct, the subject of the Ensuring Integrity in the IRS Workforce Act of 2016 (H.R. 3724), sponsored by Rep. Kristi Noem (R-SD), which approved by the House April 21. "Ultimately, we need to reform our tax code. This will be part of the agenda that we are going to be presenting to the American people. Right now, we have a tax code that no one can understand being enforced by an agency that no one trusts." — House Speaker Paul Ryan (R-WI), April 19
Document ID: 2016-0742 | |||||||||||||||
