Good morning and welcome to the first Ways and Means Committee hearing on elements of the tax reform discussion draft I released in February. The draft is focused on two primary goals: making the tax code simpler and fairer for families and employers, and strengthening the economy so there are more jobs and bigger paychecks for American families.
As we explore what tax reform means to the American economy and for American families, we must move away from short-term tax policy and work towards greater certainty in the tax code. When I released the draft, the first item I asked for public feedback on was the extenders and our revenue baseline. The question is not only about the merits of the individual policy, but how we should treat the revenue gained or lost by either making those policies permanent, reforming them or repealing them. Today’s hearing will help the Committee find answers to these questions.
One thing everyone in this room can agree on is that today’s tax code is too complex. And, one of the best examples of the complexity of our current tax code is so-called tax extenders and their temporary status. As such, job creators are left constantly guessing if a group of policies are going to be around next year. Families and employers literally don’t know what tax benefits they will be able to take advantage of from year to year. Yet, when examining some of these provisions, such as the research and development tax credit, we find out that some have been around for the thirty years or more.
This is no way to write tax policy, let alone try to run an economy. The United States is the only country in the world that allows such important pieces of its tax code to expire on a regular basis. How can we expect businesses to plan new hires or increased wages for workers when they don’t know what their operating costs will be?
Our draft extends or makes permanent seven business tax provisions that expired at the end of 2013. These policies must still be evaluated in the context of pro-growth tax reform and how making those permanent will help grow the economy, simplify the tax code and lower tax rates. Making some tax policies permanent now will open the door for the economic growth we need by giving consistency and stability to businesses small and large.
Specifically today, we will address the research and development credit, small business expensing, active financing exception, depreciation for certain race horses, CFC look-through, and two S-corp provisions. It is important to note that most of these provisions have had bipartisan support in the past. For example, prior to heading the Committee, Sandy Levin and I sponsored the House bill to extend the research and experimentation tax credit.
The witnesses we have before us today will help ignite an important discussion on the merits of these particular extender policies. Specifically, how they allow Americans to innovate, create jobs, and invest.
By supporting permanent policies, Washington can promote certainty for American businesses and generate additional economic growth. But, the Committee’s work will not end here, this is just the beginning of the conversation that we must have in order to overhaul the tax code so it is simpler and fairer for families. You have heard it from me before, and you will continue to hear it: We can no longer accept the status quo. Washington needs to wake up to this reality and start offering concrete solutions and debating real policies that strengthen the economy and help hardworking taxpayers. Tax reform is one way we can do that.
I look forward to hearing from our witnesses today, and to working with Members on both sides of the aisle on legislation we can move forward to address the provisions we discuss today.