14 September 2017 Senate Finance Committee holds individual tax reform hearing On September 14, 2017, in opening a hearing on individual tax reform, Senate Finance Committee Chairman Orrin Hatch (R-UT) said the work of the "Big Six," a group of Administration and congressional negotiators that he is a part of and that will release a tax reform outline the week of September 25, "will not dictate the direction we take in this committee" on the issue. "Any forthcoming documents may be viewed as guidance or potential signposts for drafting legislation. But, at the end of the day, my goal is to produce a bill that can get through this committee. That takes at least 14 votes, and hopefully we'll get more," Chairman Hatch said. "Anyone with any experience with the Senate Finance Committee knows that we are not anyone's rubber stamp. If a bill — particularly on something as consequential as tax reform — is going to pass in this committee, the members of the committee will have to be involved in putting it together." In his opening statement, Ranking Democrat Ron Wyden (D-OR) bemoaned, "This morning the Finance Committee is going to spend a few hours spinning its wheels while the actual framework of the Republican tax plan is being written behind closed doors." Wyden also said while President Trump has declared his plan would not provide tax breaks to the wealthy, his previous proposals would create a "loophole for the wealthy allowing them to abuse pass-through status." Chairman Hatch said his preference is to move tax reform through the Committee with bipartisan support, but that will be made difficult by Democrats demanding that tax reform legislation be made "easier for them to block" by moving outside of the reconciliation process. Wyden said it appears the Administration and Republicans in Congress are committed to a partisan approach and using "reconciliation to jam this tax plan through the Senate." — Lily Batchelder, Professor Of Law And Public Policy At New York University School Of Law And Affiliated Professor At New York University Wagner School Of Public Service, University of New York Batchelder said previous Republican tax reform proposals "create a giant new loophole for the wealthy in the form of a special rate cap on pass-through business income." Brill said lawmakers in pursuit of revenue-neutral tax reform should focus on the likely revenue impact of tax reform beyond the 10-year budget window rather than the impact within the budget window. Harrison expressed unwavering support for the mortgage interest and property tax deductions, and other favorable housing provisions. Ponnuru laid out a case for expanding the child credit. The potential for a proposal to eliminate the deductibility of State and local taxes was addressed by both the Chairman and Ranking Member. Wyden said such a move would not just harm those "from blue states. There are middle class families across the country — taxpayers in deep blue areas that went for Clinton and scarlet red areas that went for Trump — that'll be taxed twice on the same income if the state and local deduction is eliminated." During questioning, Hatch noted Harrison's testimony that the State and local deduction for real property taxes is mostly a benefit for the middle class, and cited Joint Committee on Taxation information suggesting the vast majority of the benefit of the State and local deduction for income taxes goes to those with incomes of more than $200,000 annually. "So it appears that there's a real difference between who benefits from the deduction for real property taxes and who benefits from the deduction for State and local income taxes," Chairman Hatch said. Senator Ben Cardin (D-MD) said there is a reason for the State and local deduction, which is an acknowledgement of the fact that the same taxpayers pay federal taxes, and noted that Republicans have advocated preventing double taxation in other contexts. Addressing the potential for so-called Rothification, Senator Cardin said proposals that deal with timing with regard to the collection of taxes on retirement savings in order to generate short-term revenue could have an adverse impact on retirement security. Batchelder said the proposal some have advanced is to require people to make all or part of their contributions to their retirement plans on a Roth basis, meaning they are after-tax instead of pre-tax. She said the two would be identical economically for those whose tax rates are constant over time, but the proposal would have a very big timing impact and result in raising revenue within the budget window but losing it outside the window. Senator Rob Portman (R-OH) also asked about the effect of "Rothification" on the incentive to save. Brill said take-up rates for Roth accounts are lower and policymakers should be cautious about the effect of mandating such accounts. Separately, a group of Finance Committee Democrats sent a letter to the Big Six group of negotiators on the issue, saying, "At a time when working families are already struggling to get ahead, reducing or taking away tax-deferred retirement savings options could have significant long-term consequences." Senator Bob Casey (D-PA) asked about President Trump's proposals on child care and inquired as to why a credit for child care costs is preferable. Last year, Trump detailed his child care plan to allow working parents to deduct from their income taxes child care expenses for up to four children and elderly dependents, capped at the average cost of care for the state of residence. Batchelder said the proposals didn't address current challenges in that they provided larger benefits for higher-income families and lower benefits for lower-income families, who tend to spend a greater share of income on child care. She said a preferable approach would be a refundable credit for child care that helps those most burdened by the cost.
Document ID: 2017-1500 | |||||
