ICYMI: Chairman Murray Holds a Hearing on Supporting Broad-Based Economic Growth and Fiscal Responsibility through a Fairer Tax Code
Chairman Patty Murray (D-WA) and the Senate Budget Committee held a hearing on Supporting Broad-Based Economic Growth and Fiscal Responsibility through a Fairer Tax Code. The hearing featured majority witnesses John L. Buckley, J.D., former Chief Tax Counsel of the House Committee on Ways and Means, and former Chief of Staff of the Joint Committee on Taxation, and Jane G. Gravelle, Ph.D., Senior Specialist in Economic Policy at the Congressional Research Service.
Chairman Murray called for closing unfair and inefficient tax loopholes that benefit those who need them the least, in order to reduce budget deficits and invest in priorities that support economic growth.
“…this adds up to a 21st century economy where, even as those at the very top continue to prosper, it has become more and more difficult for many families to afford the middle-class lifestyle they are working so hard for. I think we can all agree that’s not the kind of economy we want now or in the future. Changes to our tax code can’t solve this problem alone, but there is no question tax reform can and should be a powerful tool in the fight—especially because right now, inefficiency and unfairness in our tax code is actually making things worse,” Murray said at the hearing.
“Today, our tax code is riddled with wasteful loopholes and special-interest carve-outs. In 2014 alone tax expenditures, or the countless special tax breaks in our code, will cost us $1.4 trillion. That’s more than we’re expected to spend on Medicare, Social Security, or our national defense this year. And far too many of these tax breaks are skewed to benefit those who need them the least. There is a real need for reform when it comes to these unfair tax breaks… by letting them continue, we are spending a lot of money through the tax code on wasteful and inefficient giveaways to people and businesses who don’t need help, at a time when investing in better schools, infrastructure repairs, or medical research would benefit a lot of families who really do,” Murray said.
Murray also described policies that would support workers and families, by making our tax code fairer, including the 21st Century Worker Tax Cut Act she recently introduced.
“As we look for opportunities to move forward on the larger effort, I’m hopeful that we can also look for opportunities to compromise in areas where there is some more agreement right now. Chairman Ryan and I were able to reach a compromise on the budget agreement to avoid another government shutdown and create some economic certainty. Now, I think it’s time for the two parties to build on that bipartisan foundation by coming together and finding ways to make the tax code more fair for working families. We can do this by getting rid of some of those wasteful loopholes I mentioned earlier—and putting the savings towards helping working families keep more of their money, and making job-creating investments in areas like infrastructure and R&D that both sides agree are important.”
“The 21st Century Worker Tax Cut Act I recently introduced is a good example…The proposal builds on work incentives in the EITC that both Republicans and Democrats agree have been effective. And it is paid for by closing wasteful, unfair corporate tax loopholes that Chairman Camp and Democrats proposed eliminating.”
Read Murray’s opening statement here.
Watch Murray’s opening statement here.
Murray asked witness John Buckley if providing targeted tax relief to struggling workers - which the 21st Century Worker Tax Cut Act would do – is a better use of taxpayer resources than allowing egregious corporate tax loopholes to continue.
Buckley: “I absolutely agree. I think the barriers to employment faced by two-worker married couples are significant when they have children, and so that anything that is done to address those barriers, make it easier for them to get quality daycare, to afford the cost of that, is positive. I am deeply troubled when you see tax reform plans like Dave Camp’s that repeal the Dependent Care Credit, and that will result in a net tax increase on many of the two-earner spouses that you are concerned about. We should make it easier for them to enter and remain in the workforce.”
Murray: “And we want people to work. I know my counterpart here has talked about that before, but it is a disincentive to the second worker when they start working and they have to pay for childcare and clothes and transportation, and are not getting that tax credit. Correct?”
Buckley: “That’s correct.”
Read Buckley’s testimony here.
Murray explained that the 21st Century Worker Tax Cut Act would combat profit-shifting and tax haven abuse, and asked witness Dr. Jane Gravelle to explain the magnitude of offshore profit-shifting and tax avoidance.
“So, the estimates that I look at would say that, I think the profit shifting –sort of the best estimates, amount to probably about $70 billion in FY 2015. That’s profit shifting, not revenue we could raise from it. But it’s growing, it seems to be growing all the time. If you applied a 35 percent rate, you could get a substantial revenue gain from that. I think there’s certainly ways to collect that money effectively. A lot of countries tax currently income from countries that have low taxes – that’s very common. But we don’t do any of that,”Gravelle said.
During her testimony, Gravelle described some of the benefits of the 21st Century Worker Tax Cut Act.
“The Tax Reform Act of 1986, for example, expanded the Earned Income Credit. The provision that Chairman Murray recently proposed for the EIC and the second worker – there are a lot of merits of those. I actually wrote a paper about this in 2006, where basically I showed with my coauthor… that you would improve horizontal equity – the most important thing to increase horizontal equity in the tax law is to increase the EIC for couples, married couples without children and single individuals. There’s very little EIC for them.” Gravelle explained
Read Gravelle’s testimony here.
Murray also asked Buckley to explain how House Ways and Means Chairman Dave Camp’s approach to tax reform would lead to larger deficits and tax cuts for the wealthy in the future.
“It’s fairly simple. If you just look at the revenue table of Chairman Camp’s bill, and look at what I call permanent changes in the laws, other than timing changes, he has well over a trillion dollars in permanent tax reductions. That is offset by a series of pure, one-time revenue increases, the tax on the unrepatriated profits of US multi-nationals, release of reserves from repeal of the LIFO accounting method. Those are purely one-time revenue increases. They are in the range of a couple hundred billion dollars. He also forces everybody into Roth IRAs and claims that to be a revenue increase. It’s not a revenue increase. It’s a tax benefit disguised as a revenue increase in the budget window. And then finally he has a whole series of pure timing changes: repeal of accelerated depreciation, repeal of expense treatment for R&D, repeal of expense treatment for advertising expenses. Those are all pure timing changes and they will disappear to a very large extent. I’ve seen as much as two-thirds disappear outside the budget window. So it’s fairly simple math. He results in growing deficits outside the 10 year window.”
“Also, all of those one time and temporary tax increases are taken into account for distributional purposes. During the 10 year window these are changes affecting businesses. The way the Joint Committee on Taxation distributes tax burden, they will flow to almost all upper income tax payers. That’s what enables his distributional tables to look distributionally neutral in the ten year budget window… Those revenues disappear and the upper-incomes will get a substantial net tax cut, and you only have to look at the Joint Committee distribution tables to find that people making more than a million dollars get a significant tax reduction in the last year of his 10 year budget window,” Buckley said.
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