Congress has a once-in-a-generation opportunity to rewrite the U.S. Tax Code to promote job growth and reduce the federal budget deficit, said Senate Finance Committee Chairman Max Baucus, D-Mont.
Jobs, innovation, competitiveness and opportunity should be four principles that govern tax law, he said last Monday in a speech at the Bipartisan Policy Center in Washington. Mr. Baucus provided few specific details on his views about contentious issues, such as a top rate, a revenue level or the fate of popular tax breaks.
“Our Tax Code is growing out of control,” Mr. Baucus said. “It's time we had a Tax Code for the 21st century.”
Unless Congress acts, tax rates for wages, capital gains, dividends and estates will increase at the end of the year as tax cuts expire.
The increases are part of the so-called fiscal cliff, which includes automatic spending cuts and could push the United States into a recession if Congress does nothing, according to the Congressional Budget Office.
Mr. Baucus provided few hints about what he thinks Congress should do in the near term, saying that lawmakers shouldn't lock themselves into positions before the election that inhibit their ability to act in the lame-duck session afterward.
“My view is everything is on the table,” he said. “That's a psychology that I think is very important to get people talking.”
President Barack Obama has proposed higher tax rates for the top 2% of earners and limits on their ability to take tax breaks. He supports lower corporate tax rates, coupled with the removal of tax breaks.
House Republicans, by contrast, adopted a budget that calls for no additional revenue and 25% top rates on individuals and corporations, down from the present top rate of 35%. They haven't specified what tax breaks they would eliminate or curtail.
Panelists who spoke after Mr. Baucus noted his cautious approach to offering details, which fits with his track record of trying to develop consensus proposals.
“There was nothing that he said that impedes bipartisan cooperation,” said Robert Greenstein, president of the Center on Budget and Policy Priorities, a group that advocates policies that benefit lower- and middle-income Americans.
Mr. Baucus said that he hoped to speak with other members of his committee next week about expired provisions, such as the research and development tax credit, to see if those are issues on which lawmakers can start working together without having to consider Democratic proposals for the “Buffett rule” tax on millionaires or Republican proposals to repeal the estate tax.
He called for changes to the international tax system to help make U.S. companies more competitive and prevent profits from being shifted to overseas tax havens, saying that the United States has the “worst of all worlds.”
Mr. Baucus didn't say whether he would support a switch to a territorial system that would exempt most foreign profits from taxation, such as the one that his House counterpart, Rep. Dave Camp, R-Mich., has proposed.
Asked about Mr. Camp's plan after the speech, Mr. Baucus said: “I'm not sure what he proposed. None of us know precisely. The main thing is this: I believe that too often in this town, we're focusing on mechanics.”
Mr. Camp, chairman of the Ways and Means Committee, has proposed coupling an extension of expiring tax cuts with a process to require a tax overhaul next year.
Mr. Baucus said that he would consider such triggers, which he noted have been discussed before in bipartisan efforts.
He said that he plans to hold a hearing soon on the plan proposed by the leaders of the president's fiscal commission, former Sen. Alan Simpson, a Wyoming Republican, and Erskine Bowles, a former White House chief of staff under Bill Clinton. Mr. Baucus served on the commission and opposed its final report.
He also said that he will hold a hearing on a plan developed by former Republican Sen. Pete Domenici of New Mexico and Alice Rivlin, a former CBO director and Federal Reserve Board vice chairman.