The incoming Republican Senate majority’s top tax writer highlighted the obstacles along the path to tax reform Thursday, even as he called it his “highest priority.”
“I don’t know that we’ve even scratched the surface on the degree of difficulty we face when it comes to tax reform,” Sen. Orrin Hatch of Utah said Thursday.
Hatch, set to be the chairman of the powerful Finance Committee, released a 340-page report on the multiplicity of policy questions surrounding the U.S. tax code that would have to be addressed in a reform effort.
“We live in very partisan times,” the report begins.
Recent congressional attempts at tax reform have found little political support. Outgoing House Ways and Means Chairman Dave Camp of Michigan announced a comprehensive reform draft bill in February, only to have it spurned by both parties and roundly criticized by businesses that stood to lose breaks. Even smaller tax provisions have caused major problems for legislators.
In advance of the GOP taking control of the Senate in January, the Obama administration has been raising the possibility of a compromise over reforming the corporate side of the tax code.
Treasury Secretary Jack Lew reiterated his support for a corporate tax overhaul Thursday morning, insisting during a New York Times Dealbook conference that the politics could work.
Acknowledged the stark divide between Democrats and Republicans on the tax rates paid by individuals, Lew claimed that “on the business side, there’s 70-80 percent overlap on the concept of how to approach tax reform.”
Earlier in December, Hatch’s Republican counterpart in the House, incoming House Ways and Means Committee Chairman Paul Ryan, sounded relatively welcoming toward the administration’s overtures on business tax reform.
“If we can get halfway toward comprehensive tax reform … I think that’s great,” Ryan said at a conference event.
Nevertheless, the politics of legislation that would reduce corporate tax rates while cutting breaks and loopholes would be tricky. Hatch said in the foreword to his report, “I have repeatedly called for a comprehensive approach that fixes the tax code for individuals and families as well as corporations and small businesses.”
One particular obstacle would be the treatment of businesses that file taxes through the individual side of the tax code. Lowering the corporate tax rate to 28 percent, as the White House would like to do, while maintaining a nearly 40 percent individual tax rate could prompt many businesses to restructure.
“That’s something we’re going to have to work through,” Lew acknowledged Thursday.
Nevertheless, Lew sounded optimistic Thursday morning.
“I’ve had conversations with Republicans and Democrats that lead me to believe there’s going to be a different kind of approach taken next year to dealing with business tax reform where we can find that 70-80 percent agreement,” Lew said.
