Rep. Paul Ryan, R-Wis., was officially named the chairman of the House Ways and Means Committee on Tuesday for the incoming Congress. Self-imposed House rules will allow for Ryan to remain chair for up to six years, which could mean Ryan will design comprehensive tax reform during the next president’s first term.
In the meantime, for the next two years, Ryan will get to work with what is expected to be the most Republican-dominated House since the 1929-31 term, and the most-Republican Senate since the GOP lost control of the chamber in 2006. Here are five reforms Ryan should propose to the 114th United States Congress:
1. Fix the 2013 payroll tax hike
Overshadowed by the fiscal cliff deal, the expiration of a two-year payroll tax cut meant a two percentage-point increase in payroll taxes on employees. For a single-earner who made $50,000 in 2012 and 2013, this amounted to a $1,000 loss per year. Higher earners were hit with an extra 0.9 percent Medicare tax, as the result of the implementation of President Obama’s healthcare law. Even with the additional revenue, Social Security and Medicare’s finances remain on a dire path. Reinstating the tax cut would leave workers with more disposable income to spend in the economy.
2. Make it easier for families to file taxes
The Taxpayer Advocate Service estimates that taxpayers spent 6.1 billion hours filing their taxes in 2010, with compliance costs of $168 billion. Divided amongst the 141.4 million individual tax returns in 2010, on average it took 43 hours and $1,188 to file one tax return. Ryan should work with the Taxpayer Advocate Service to eliminate or simplify the most troublesome deductions, in return for a revenue-neutral income tax rate cut.
3. Repeal Obamacare’s medical device excise tax
Under the veil of “medical devices,” Obamacare included a tax on manufacturers that sell equipment to hospitals, including prosthetics, pacemakers and MRI machines. Repeal of the tax has garnered bipartisan support from Republicans looking to peel back Obamacare and Senate Democrats with medical device manufacturers in their states, such as Sens. Elizabeth Warren, D-Mass., Al Franken, D-Minn., and Amy Klobuchar, D-Minn. The tax is ultimately passed onto consumers, in this case, that includes amputees and heart patients.
4. Don’t renew the wind production tax credit
Hopefully, the wind production credit won’t even make it to the new year. It is one of 55 currently-expired tax extenders that Senate Democrats hope to retroactively extend through the end of 2015. But House Republicans only want to keep a few of the extenders alive, opting to instead make their most-important extenders permanent. Extension of the wind production tax credit through 2015 is estimated to cost $13 billion over 10 years. Whether in 2014 or beyond, renewable energy producers don’t deserve special treatment in the tax code.
5. Create jobs by cutting the corporate income tax rate
One of the U.S. tax code’s most embarrassing aspects is the highest-in-the-developed-world corporate income tax. Of the 34 countries in the Organisation for Economic Co-operation and Development, just three have not cut their corporate income tax rate since 2000: the U.S., Hungary and Chile. The excessively high tax rate has kept investment abroad that could have created American jobs.
Obama expressed interest in corporate tax relief in February 2012 when he released a framework for reform that would cut the corporate tax rate to 28 percent. Earlier this year, Rep. Dave Camp, R-Mich., the current Ways and Means Committee Chairman, introduced legislation that would have cut the rate to 25 percent, but the legislation never received a vote in the House. A key sticking point would likely be over whether such reform would be revenue neutral, or a net tax increase, which would make it toxic for Republicans.
By no means is this an exhaustive list of tax reforms for Ryan to pursue. But passage of any of these five proposals would be significant progress over the status quo.
