With much uncertainty swirling around Washington due to the dysfunctional Congress, one thing is certain, when it comes to overhauling the nation’s tax code we could not be in better hands than the current veteran lawmakers leading the Committees of jurisdiction on the topic in each legislative chamber, namely Senator Max Baucus (D-MT), Chairman of the Senate Finance Committee and Dave Camp (R-MI), Chairman of the House Ways and Means Committee. Both lawmakers have been meeting each week for the past two years discussing ways to change the outdated and complex tax system to spur economic growth, enhance U.S. global competitiveness and set the U.S. on a sustainable fiscal path for the 21st Century.
Given the current dysfunction of Congress many observers give comprehensive tax reform little, if any chance for enactment anytime soon. Simply put, it’s too much of a heavy lift for this Congress. According to House and Senate staff of the committees time is of the essence to complete such an overhaul of the tax code as the window of opportunity is between now and Thanksgiving.
But the groundwork already completed by the veteran lawmakers and their respective Members serving on the tax-writing committees will help lighten the load for Congress. Discussion drafts have been created and made available since January of this year. Those drafts were created in a transparent and inclusive method by both Republicans and Democrats serving on the committees. Below we have provided links to those documents.
Without question the nation’s tax code is in need of an overhaul. Consider, half of the private sector workforce is employed by small businesses. That’s roughly 60 million Americans! And, according to the Small Business Administration, small businesses have generated 65 percent of net new jobs over the past 17 years, outperforming larger firms by 75 percent.
But, for small businesses to comply with the current tax code it is estimated to cost up to $19 billion each year. In fact costs for smaller businesses to comply with the current tax code are 65 percent higher as opposed to big businesses.
Tax compliance for individuals is burdensome too. According to the Internal Revenue Service the estimated average time burden for all taxpayers filing a Form 1040, 1040A, or 1040EZ is 13 hours, with an average cost of $210 per return.
Chairmen Baucus and Camp are structuring a comprehensive plan for tax reforms that will significantly lower tax rates for individuals, small businesses and corporations. The current top rate for individuals and corporations is 39.6 percent on taxable income. Discussions have targeted reducing this top rate down to 25 percent.
Such a rate reduction for corporations would make the U.S. more globally competitive, bringing it in line with the average of countries in the Organization for Economic Cooperation and Development (OECD). It will also free-up current earnings held overseas that can be reinvested in the U.S. after being taxed (at the lower rate) in line with current repatriation proposals.
But such a tax rate reduction will come at a cost. For example, during deliberations regarding the massive $16 trillion U.S. debt, the Simpson-Bowles Commission developed a tax reform proposal that would drop the top tax rate to 23%. The cost of this reduction in rates would be paid for by eliminating, or reducing all of the (total) $1.1 trillion in “tax expenditures,” or “deductions, credits, and various other tax breaks,” that could significantly impact: charitable contributions deduction, homeowner mortgage deduction, pre-tax retirement savings, deductions for state and local income, sales and personal-property taxes, and diminish the value of business write-offs.
There are multiple signals occurring that indicate comprehensive tax reform is likely, but the timeline remains unclear. The timeline will be impacted by several debates on items like generating the revenue needed to lower tax rates, change to a territorial tax system and reaching consensus on whether or not tax reforms should also generate revenue marked toward deficit reduction.
The timeline could also be impacted by the unfortunate loss of current leadership. Chairman Max Baucus has announced his retirement in 2014 and Chairman Dave Camp is term-limited as Chairman of the House Ways and Means Committee via the self-imposed rule by the Republican Steering Committee.
Everyone will be impacted by the decisions being made by lawmakers on comprehensive tax reforms. If you need quality representation from an entrepreneurial lobbying firm, contact Cansler Consulting. We are a certified lobbying practice experienced in the mulch-faceted and inter-related industries of Agriculture, Food and Drug Safety, Immigration, Transportation & Infrastructure, International Trade and Energy. Through our congressional and regulatory relationships established for over two decades we can help you influence the policy makers on Capitol Hill and navigate the federal budgeting process. You can contact us at email@example.com or at (202) 220-3150.