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Looking For Tax Reform This Year? Don’t Hold Your Breath
SARA WYANT
WASHINGTON, D.C.
Tax day has come and gone and there has been plenty of discussion on Capitol Hill about the need to fix our broken tax system, to add more certainty to existing tax breaks and to repeal federal estate taxes.
House Ways and Means Chairman Paul Ryan, R-Wis., has been saying there’s still a chance to do a corporate tax reform bill, although he said it will require a deal to lower tax rates on so-called pass-throughs, entities such as partnerships and S corporations that are widely used by small businesses to avoid paying taxes twice on business profits. Profits are taxed at the individual level.
A corporate tax reform bill would help Republicans solve another problem. They need money to shore up the highway trust fund, which is due to run out of money this summer. Ryan told reporters recently that there’s no “Plan B” for finding the money.
But don’t look for any of that to be fixed anytime soon. Finding common ground between both political parties and developing a bill that President Obama will sign still seems like a long shot this year.
“The stars have to line up in an amazing way to have real tax reform in Congress,” noted Sen. Dick Durbin, D-Ill. “The last time we did it – I think – was, shoot, 30 years ago. So, it doesn’t come around very often and so it will take the president sitting down with Republican leaders and Democrats in Congress to come up with a tax reform. That is no mean feat in the political climate we’re living in.”
It’s not for lack of trying to move at least some tax changes.
Rep. Kristi Noem, R-S.D., made a personal case for repealing the tax, citing her family’s experience when her father was killed in a farming accident while she was in her early 20s. The family faced a choice of selling land that was needed to stay in business or taking out a loan to pay the estate tax bill.
“For the next 10 years I paid on that stupid loan for a federal government that threatened our family business because we had a tragedy,” Noem told members of the House Ways and Means Committee.
The GOP-controlled House of Representative recently passed a repeal of the federal estate tax by a vote of 240-179. However, only seven Democrats voted for repeal. Several Senate Democrats and President Obama remain strongly opposed.
One of the concerns was the cost. Killing the federal estate tax would cost the government $117 billion in lost revenue between now and 2020, the Joint Tax Committee estimates. Others, like Sen. Durbin, also cite concerns about inequality.
“We made a major change in the estate tax….in terms of the exemption and in terms of cost-of-living adjustments,” he told listeners on Agri-Pulse Open Mic.
Starting in 2010, Congress raised the exemption to $5 million, indexed the limit to inflation and lowered the top tax rate. For 2015, the exemption is $5.43 million and the top tax rate is 40 percent. For years until 1997, the exemption was set at $600,000 and the top tax rate was 55 percent.
“I thought reform long overdue and I supported it, but this notion of eliminating this tax – let me tell you, when you look at this tax code, here is the bottom line. We are finding that people of limited means are paying a higher percentage of their income than many of the people at the highest income categories,” Durbin said.
“The estate tax is a tax break for the top one or two percent – or maybe less – of America, and from where I’m sitting at a time when people are decrying deficits and worried about income inequality, I cannot understand the political force behind this. I was for reform, but I think repeal goes way too far,” emphasized Durbin.
The Senate Majority Whip was more upbeat about the passage of a package of tax extenders, including the popular Section 179 expensing allowance.
“We always do the extenders. We wait until the very last minute and sometimes go into overtime,” Durbin explained. “The extenders should be extended, and I’ve voted for them every year. I’m sorry that we go through this exercise, but keep in mind these are all temporary tax changes that need to be extended on an annual basis.
“Someone has suggested – and I happen to believe they’re right – we ought to make this permanent tax change and stop playing this terrible game with the uncertainty of what’s going to happen in the future,” Durbin added.
The problem with taking up an extenders bill now is that the move would be read as a signal that tax reform is dead, said Sen. Charles Grassley, a member of the Senate Finance Committee. The Iowa Republican doesn’t think the delay will last until December, however. “Everybody knows that doing it in December is the wrong thing to do,” he said. ∆
SARA WYANT: Editor of Agri-Pulse, a weekly e-newsletter covering farm and rural policy. To contact her, go to: http://www.agri-pulse.com/
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