Getting Things Done: Fixing a Broken Tax Code

July 2, 2015 — Blog   

This week we’ve run through the many achievements of the House Ways and Means Committee over the first six months of this year. Issue by issue, the committee’s been getting things done. Finally, we’re proud to provide an update on what the committee has accomplished in its biggest issue area: taxes.

The tax-writing committee in the House, Ways and Means has a vast jurisdiction over nearly all revenue into the treasury, and it’s responsible for any changes to the U.S. tax code. And changes, as most Americans understand, are badly needed. The American tax code is long overdue for comprehensive reform, and cleaning up the system is up to Ways and Means. So, for many months now, we’ve been putting in place the building blocks for this monumental task.

Tax Certainty 

The first step to fixing our tax code is providing certainty for families and small businesses. Each year, for a long time now, Congress has renewed a number of tax policies – sometimes even retroactively – that ordinary Americans and job creators alike count on. Many of these so-called extenders have been part of the code for over a decade, but still, Congress continues to act under the fiction that these provisions are temporary, and to write tax law year by year, creating needless uncertainty and confusion.

So Ways and Means has pushed forward a series of bills to make many of these tax policies formally permanent, allowing businesses to focus on creating jobs and families to have some tax predictability. From the research and development tax credit to provisions encouraging charitable contributions to expensing for small business investments to the state sales tax deduction for families, we’ve been passing bills designed to give people a little relief from the madness of annual tax “extenders.”

And as we’ve already detailed, the House overwhelmingly passed a repeal of the burdensome Medical Device Tax included in Obamacare. It’s driving up health care costs, discouraging innovation, threatening jobs, and it needs to go.

FamilyFriendly Reforms

At the same time, the committee has advanced a number other reforms designed to make life easier for American families.

When President Obama proposed taxing college savings plans in his State of the Union address, he was met with a fierce backlash, eventually forcing him to abandon the idea. Republicans in the House responded, not by taxing these plans, but by strengthening, expanding, and modernizing them. H.R. 529, introduced by committee member Rep. Lynn Jenkins (R-KS) passed the House in a rout, 401-20. It was a clear statement that Congress believes we should be encouraging college saving, not making it more expensive through new taxes.

And one of the greatest threats to the continuity of American small businesses and family farms is the estate tax – better known as the death tax. After Americans have paid taxes on income all their lives, the death tax is a 40 percent tax on those same assets over a certain amount when they’re transferred to the next generation after a person’s death.  Often times, this “estate” is a small family–owned business or a farm or ranch that has been built up over decades. This tax can destroy all that in an instant, running counter to the principles of opportunity that made this country great. That’s why the House passed a bill – authored by committee member Rep. Kevin Brady (R-TX) –to repeal it entirely back in April.

Highway Solutions: Near- and Long-Term

Another big job that often falls to the House Ways and Means Committee is managing the trust fund responsible for the construction of America’s roads, bridges, and transit systems. It’s a big challenge. We need reliable infrastructure for our economy to keep moving, but it comes with a huge cost, and the current user-fee system is increasingly falling short of what is needed.

That’s why Ways and Means, led by Chairman Ryan and Select Revenue Measures Subcommittee Chairman Dave Reichert (R-WA), has been exploring solutions, both for a permanent, sustainable funding source and for our near-term needs (current funding runs out this month) while we work toward that long-term plan – potentially through some limited tax reform plan. Which brings us to our final point . . .

Building Toward Comprehensive Reform to Fix the Code

As Chairman Ryan said at the outset of this Congress, the comprehensive tax reform that American families need is not possible under this president. President Obama wants higher tax rates on individuals and views reform as an exercise to rake in more revenue to fuel more spending. Members of this Committee, on the other hand, want a system with lower tax rates and understand that the goal of tax reform should be to create a fairer, flatter code that makes America more competitive, creating new growth and jobs. Our two visions of comprehensive reform are simply incompatible.

That doesn’t mean, however, we can’t start making progress toward our eventual goal of fixing the entire tax code. That means if we find common ground on limited changes to our tax system, we’ll explore what can get done over the next year and a half. It could even provide the solution to fund a multi-year highway bill. But if this common ground doesn’t materialize, we’ll continue working toward our ideal version for a tax reform. It may take a new president to achieve, but one thing is sure: We’re already getting the work done to be ready for it.

 

SUBCOMMITTEE: Full Committee    SUBCOMMITTEE: Tax Policy