Bloomberg News

Republicans Dig In to Press for Code Revamp After Impasse: Taxes

October 25, 2013

Republicans trying to drive a revamp of the U.S. tax code are determined to advance a measure before the end of the year even with the broken politics displayed in the fiscal impasse.

Bruised by a monthlong fight that included a partial government shutdown, House Republicans led by Dave Camp of Michigan plan to push a bill though his Ways and Means Committee this year while senior leaders tussle with Democrats on other budget and deficit issues.

They’re fighting the clock, too, with the House scheduled to be in session for just five more weeks, compressing the time to release a plan and set a vote.

“Obviously, there’s a lot of distractions in this town,” Representative Pat Tiberi, an Ohio Republican and a senior Ways and Means member, said in an interview this week. “Nothing comes easy. But that’s the goal and the chairman’s been pretty clear on it. He continues to push that ball up the hill.”

Camp is pledging to make the most significant changes to the U.S. tax code since 1986. To succeed, he must overcome the internal fault lines among House Republicans exposed during the shutdown and persuade colleagues to move ahead amid Democrats’ insistence that any revisions generate additional revenue.

After struggling to move legislation to end the shutdown and prevent a lapse in borrowing authority, House Republicans will now try to act on an issue that lacks a firm deadline. Any proposal that shuffles the tax burden will require some companies and individuals to pay more than they do now.

With the 16-day shutdown over and the risk of a U.S. default temporarily set aside, corporate tax lobbyists are watching Camp and his Senate counterpart, Max Baucus, to see what they do with tax legislation.

Corporate Rate

Camp said he plans to lower the top corporate rate to 25 percent from 35 percent and reduce the top individual rate to 25 percent from 39.6 percent. He wants do that without shifting the tax burden across income groups and without losing or gaining federal revenue.

Both tax-panel chairmen have reaffirmed their intent to propose major code changes. Baucus, a Montana Democrat, said he will release “discussion drafts” this year.

Neither has said which tax breaks would shrink or vanish in their plans. Once they do, they’ll identify the potential opposition from industries and interest groups that don’t want to lose their tax breaks.

“If history is any guide,” Tiberi said, “I think there are a lot of people who get their hair on fire because it’s either not what they expected or maybe it was what they expected and now they’re concerned about it.”

Top Priority

Camp is trying to act on one of his party’s top priorities just after the shutdown, during which Republican hard-liners pressured leaders into demanding significant changes to the 2010 health-care law.

A poll this month by The Washington Post and ABC News found that Americans disapproved of how Republicans are handling federal budget negotiations by a 77 percent to 21 percent margin and that 63 percent have an unfavorable view of the Republican Party.

Ways and Means Republicans were more likely than the party as a whole to support the final agreement Oct. 16, in which Republicans won almost no concessions in exchange for ending the shutdown and suspending the debt limit.

Among House Republicans, 62.3 percent voted against the agreement. Among Ways and Means Republicans, it was the reverse, with 62.5 percent voting for the agreement. All House Democrats voted for the agreement.

Camp said he’s been meeting with House Republicans who aren’t on the committee, trying to build support for his approach.

‘Long Term’

“This is obviously a long-term project,” he told reporters. “This is not some budget crisis, so there’s been a lot of background and groundwork that’s been done and continues to be done.”

Republicans want to simplify the tax code because of the unpopularity of the status quo, said Representative Peter Roskam of Illinois, who is one of the party’s top vote counters.

“It’s an area where you can find some significant common ground,” he told reporters. “People want to have something positive to vote for, and tax reform will be very positive.”

Republicans need a plan that could lead to a bipartisan bill that would win passage in the Democratic-controlled Senate and be signed by President Barack Obama, said Representative Tim Griffin, an Arkansas Republican. He pointed to the agreement between Camp and Obama that corporate tax changes shouldn’t generate additional revenue for the government.

“We all know that what we want in tax reform, we’re not going to get 100 percent of it,” he said in an interview. “We’ve got to start with what we agree on.”

Camp-Baucus Tour

Camp has repeatedly made a similar point and he has been working closely with Baucus. The pair traveled across the country earlier this year, visiting companies such as 3M Co. (MMM:US) and Intel Corp. (INTC:US)

They’ve acknowledged that their disagreement over revenue must be resolved without saying how they’ll do it.

Without a broad bipartisan budget agreement, the panel’s work on tax policy probably won’t go anywhere, said Representative Devin Nunes, a California Republican and senior Ways and Means member.

“If we can have an agreement, then it makes tax reform possible,” he said in an interview. “I just don’t know the likelihood of us getting to the finish line if we don’t have a big agreement. Have you ever seen a major piece of legislation get done around this place without the leadership of the White House?”

Raising Revenue

Representative Sander Levin, the top Democrat on the Ways and Means panel, said he’d like to see openness among Republicans to raising revenue, particularly as a way to end the across-the-board spending cuts known as sequestration.

“There are a couple lessons that should have been learned and one is you have to do things in a bipartisan way, sooner or later,” Levin told reporters. “And the sooner you do it, the better.”

All 16 Democrats on the Ways and Means Committee sent Camp a letter Oct. 23 calling for working in a “bipartisan manner” on taxes. Camp organized bipartisan working groups earlier this year. More recently, Republicans have been meeting alone to discuss their plan.

Bipartisan budget negotiations start next week with a Dec. 13 deadline. Representative Tom Price of Georgia, a Republican on both Ways and Means and the budget negotiating team, said the two issues will be linked “peripherally.”

If a budget agreement is reached that’s more than just something minimal, he said, it would likely include a process for tax-code changes.

Camp’s approach all along has been to have a bill prepared if and when the politics create a chance for success.

“The strategy of having something ready that can be accessed and moved into this broader debate about the long-term fiscal, economic path that we’re going to be on, I think that’s a good thing,” Griffin said.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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