The Senate Finance Committee's hearing yesterday ostensibly was about whether and how to extend the 2001 and 2003 tax cuts that are expiring at the end of this year.
But as the testimony was presented and the Q&A followed, there was a sense that many folks see the impending tax laws deadline as a great opportunity to tackle a total tax system overhaul.
Comprehensive tax reform is the political Holy Grail. Everyone is searching for a tax system that's fair, simple and raises enough money to pay for programs that the citizenry wants without making them feel like they're over paying.
Good luck with that.
Sen. Ron Wyden, the Oregon Democrat who, along with Republican colleague Sen. Judd Gregg of New Hampshire, introduced the Bipartisan Tax Fairness and Simplification Act of 2010 (S. 3018) earlier this year.
At yesterday's hearing, Wyden prodded the expert witnesses for advice on how to jump start a broader bipartisan approach to tax overhaul. The goal, said Wyden, is tax fairness and incentives, coupled with principles from both sides of the political aisle.
Keep it simple: The consensus on attaining that goal is to begin with more simple filing.
"Voluntary compliance is core," said Douglas Holtz-Eakin, president of American Action Forum in Washington, D.C., and that's achieved when taxpayers view the tax code as fundamentally fair.
To that end, said Holtz-Eakin, Congress should aim for creation of a form that taxpayers are able to fill out themselves because it's not so complicated.
Donald Marron, director of the Urban-Brookings Tax Policy Center in Washington, D.C., agreed that simpler filing would enable taxpayers to better understand their tax responsibilities.
In the short run, added Marron, Congress must consider the stimulus effect of tax cuts for the middle class. But longer term growth, he said, would benefit from lower overall rates and by "filling in the Swiss cheese" of tax loopholes in our system.
But, noted Wyden, "the troubling aspect is that we start simple and then it starts unraveling with everyone wanting to add exemptions, deductions. How can we make it harder to unravel it while acknowledging that no current Congress can stop a future Congress from making changes."
Who knew Shakespeare was a tax prophet when he wrote, "perchance to dream: ay, there's the rub."
Finance Committee Chairman Sen. Max Baucus (D-Mont.) acknowledged the calls for overall reform and said "we will work on that soon."
Another temporary, targeted extension: Baucus also noted that he liked panelist Leonard Burman's proposal to extend temporarily the 2001/2003 tax relief provisions to give lawmakers time to work on comprehensive reform.
Burman, the Daniel Patrick Moynihan Professor of Public Affairs at the Maxwell School, University of Syracuse, N.Y., said that when the tax cuts were proposed with the Dec. 31, 2010, sunset date, he originally viewed the move with "skepticism, as a budget gimmick."
"But in retrospect," Burman told the Finance Committee, "it turned out to be brilliant. It now allows us to reexamine the policies"
Burman opposes permanent extension of the Dubya-era tax provisions: "The tax code is a mess -- complex, inefficient -- why would we want to carve that in stone?"
More to the point, added Burman, budgetarily we can't afford to extend all of the expiring cuts.
But continuation of the middle class cuts, say for three years (which got Baucus' attention), could help sustain a move for tax reform, he said.
More on each panelist's perspective on the expiring tax laws can be found in their written testimony. Those documents are available, along with the opening statements from Committee leadership and a video (almost three hours!) of yesterday's proceedings, at the Senate Finance Committee's special Web page on the hearing.Related posts:
- Bush tax cuts to get Senate hearing
- Is it time for tax reform?
- The ever-growing tax code
- Presidential tax panel, take 2
- Tax reform panel report delayed
- Tax overhaul, over and out ... for now
- Federal tax law changes (PowerPoint)
- A look back at the decade in taxes