Paul Ryan already is laying the groundwork to make a tax code overhaul easier if he takes over the top tax-writing role in Congress.
Ryan, the presumed successor to retiring House Ways and Means Committee Chairman Dave Camp if the GOP holds the House in November, said Thursday that “there are two things that we are working on right now” to help him succeed where Camp fell short in pushing comprehensive tax reform.
The measures he mentioned were technical changes to the legislative process that would ease the math and the politics of lowering tax rates while expanding the tax base: Lowering the baseline for tax revenues and implementing dynamic scoring for tax legislation.
“The outcome of this election will pretty much determine this,” Ryan added.
When Camp announced a tax reform draft earlier this year, it was met with resistance from businesses that would have lost tax preferences and from lawmakers who would have seen some of their constituents pay higher taxes. Although it was widely praised by experts for its boldness in taking on special interests, Camp’s plan only raised enough revenue from closing loopholes to cut the top individual rate to 35 percent, well above Ryan’s proposed target of 25 percent.
In response to a question from the audience at an appearance at the Financial Services Roundtable, Ryan said Thursday that Camp’s plan had to cut too much because of the requirement that it not add to the deficit.
Instead, Ryan hopes to face an easier task by lowering the baseline for revenue that a tax plan would maintain and by using dynamic scoring, which would take into account any economic growth and subsequently higher tax revenue produced by tax changes.
During the lame duck period, Ryan said, Congress may be able to make permanent some of the so-called “tax extenders,” expiring tax benefits for individuals and businesses, such as deductions for tuitions and deductions for corporations’ research expenses. The extenders generally lower tax revenues but are not included in the official revenue baseline because they are temporary. If the GOP does well in the midterm elections, Ryan suggested, they might be able to make more extenders permanent, thereby lowering the official revenue baseline calculated by the Joint Committee on Taxation, Congress’ official tax scorekeeper.
Then, if the GOP retakes the Senate, Republicans in the Senate and House would be able to change the Joint Committee on Taxation’s process for scoring tax changes, Ryan said. “Econometrics has come a long way since I was doing econometrics on SAS in the 1990s,” Ryan said, referring to a statistics software package. “We can do so much more in measuring the effects of tax legislation.”
Republicans have long criticized the committee and the Congressional Budget Office estimates of legislation for not including the dynamic economic effects of tax cuts, although dynamic scoring is viewed warily by many budget experts. “People call it dynamic scoring, I prefer call it reality-based scoring,” Ryan explained.
If his tax reform does include dynamic scoring, it would be the first time Ryan has relied on the procedure. In the Republican 2015 budget that he wrote as House Budget Committee chairman, Ryan included dynamic savings to ensure that the budget balanced within 10 years. The dynamic savings, however, came from the economic feedback from lowered debt,
Although Ryan said he is working on preparing a legislative push for tax reform, he acknowledged that it would be a difficult task.
“Typically tax reform in history has been led by presidents, ’86 is a perfect example,” he said, referring to the 1986 tax overhaul achieved by President Reagan and a Democratic-led House.
“That won’t be the case this time if we get it in the next two years,” Ryan noted, claiming that the Obama administration is resistant to lowering individual tax rates. “It will have to be led by Congress, and we’ll see what we can get,” he added.
