Can The Baucus-Hatch Blank Slate Plan Jump Start Tax Reform?

By :: June 27th, 2013

Senators Max Baucus (D-MT) and Orrin Hatch (R-UT), the chairman and senior Republican on the Senate Finance Committee, tried to jump-start the drive towards tax reform today with what they call a blank slate rewrite plan. Trouble is, it is not exactly a plan. And it isn’t quite a blank slate.

Their idea is to get senators to tell them by July 26 which tax preferences are worth keeping and which should be scrapped. So Baucus and Hatch adopted a zero-base budgeting approach.

In a letter to fellow senators, they said they plan to start their reform exercise by assuming that nearly all tax preferences are repealed. They’d then restore those that meet at least one of three tests: “(1) They help grow the economy, (2) make the tax code fairer, or (3) effectively promote other policy objectives.”

Unfortunately, the first two are in the eye of the beholder and the third, well, I have no idea what the third means.

I do know their plan will be a massive summer windfall for lobbyists and trade groups that are already gearing up to find senators to defend their tax subsidies (cell service on the Vineyard is dicey but it will have to do). Within an hour of the release of the Baucus-Hatch letter, I was getting calls and emails defending various tax breaks.  

Mortgage interest deduction? Well, of course it helps grow the economy. Charitable deduction? What could be more fair? Special deductions to promote U.S. manufacturing? That’s got to be an “other” policy objective.

And it won't be hard for those lobbyists to find senators willing to defend these preferences. What price would they pay for doing so? 

Baucus and Hatch make their job even tougher by acknowledging in their letter that “some existing tax expenditures should be preserved in some form.” They don’t say which ones (and may not even agree on the list) but they are signaling that cleaning out the code may not be quite so easy. 

Their zero-based budget strategy isn’t new. Erskine Bowles and Alan Simpson, the co-chairs of President Obama’s ill-fated fiscal commission, engaged in the same exercise back in 2010.

But Bowles and Simpson started with an overarching goal: They wanted to generate about $1 trillion in new revenues over 10 years to go along with about $2 trillion in non-interest spending reductions, and they wanted to reduce tax preferences enough to also buy some politically attractive rate cuts. In the end, even they could only come up with a set of alternative tax reform scenarios rather than a single concrete proposal.

Baucus and Hatch (and House Ways & Means Chairman Dave Camp (R-MI)) have no such bottom-line plan. They can’t agree on whether tax reform should generate any new revenue at all. As a result, they are asking senators to pitch various tax expenditures in a vacuum.

Take one example of why this is so hard: A lawmaker might be willing to tax capital gains at ordinary income rates if the top rate is cut to, say, 25 percent. She might not be so willing if the top rate is going to be 35 percent.

Baucus is scrambling to build some momentum behind reform before he retires from Congress in 18 months. And he knows he’s got less time than that with the congressional campaign season likely to start in a year.

Baucus is in a tough spot, and any reform effort faces severe constraints in today's political environment. But he needs to start with a plan, not a blank slate.  A chairman's mark with a specific set of rates and limited preferences would focus the Senate's collective mind. But this isn't that.        

 

39Comments

  1. STEVEN J. FROMM, ATTORNEY, LL.M. (TAXATION)  ::  4:56 pm on July 3rd, 2013:

    I would be very, very surprised that such a bill will ever get passed. The ideas are sound but the reality is much different.
    For example, why is there is still an AMT in our code when the 1986 tax act basically gutted tax shelters by introducing the passive loss limitation rules. Tax revenue is why it is still there; if fairness was ever a consideration with these guys the AMT would have been long gone. And this is just one example.
    All I can say to Baucas and Hatch is “Good luck with that!”

  2. Michael Bindner  ::  11:29 am on July 4th, 2013:

    As I responded to Bartlett’s column on this: A truly zero based tax reform would put both a VAT, a VAT-like Net Business Receipts Tax and reforms to Social Security (including transferring the employer contribution to either the VAT or NBRT) on the table. The main drivers of the Buffett problem were low taxes on capital gains and dividends (which the Affordable Care Act and the ATRA largely solved) and the fact that high incomes and much of non-wage income is not covered by Social Security Taxes (although HI is). Such reforms would take a commitment by the President or a presidential candidate.

    I don’t see a Democrat offering this, especially not Clinton. Huckabee might offer something like this – although it seems the right is stuck on the Fair Tax. If Herman Cain had been serious, his 9-9-9 would have been 9-27-27, but he was political theater. It will take a new truly liberal party devoted to worker ownership to put forward something like I am proposing.

    Most importantly, because the President got most of his tax agenda on January 2nd, he really has nothing left to do unless he is willing to touch Social Security reform – changing the employer contribution but not the employee contribution and equalizing the crediting of the employer levy so each person is credited with the same amount, regardless of income. I don’t see him doing that, since it invites private accounts.

  3. chriss  ::  5:25 am on July 12th, 2013:

    It would be great if Baucus & Hatch could achieve success with that but I’m really not sure if this is possible at all. The tax code surely need to be reformed but it’ll never happen when just a few of congressmen understand the Constitution and voters seem to prefer those who don’t…

  4. dedicated hosting  ::  4:58 am on August 5th, 2013:

    Good day! This is my 1st comment here so I just wanted to give a quick shout out and say I genuinely enjoy reading your articles. Can you suggest any other blogs/websites/forums that go over the same topics? Thanks!|

  5. louis vuitton 銀座  ::  9:47 pm on August 6th, 2013:

    louis vuitton かばん

  6. ブランド 財布 格安  ::  9:47 pm on August 6th, 2013:

    louis vuitton 財布 メンズ

  7. louis vuitton カバン  ::  9:47 pm on August 6th, 2013:

    バッグ ブランド

  8. louis vuitton ドレス  ::  9:49 pm on August 6th, 2013:

    財布 ランキング

  9. 財布 louis vuitton  ::  9:49 pm on August 6th, 2013:

    louis vuitton 人気

  10. ルイヴィトン louis vuitton  ::  9:50 pm on August 6th, 2013:

    神戸 louis vuitton

  11. ルイヴィトン 財布  ::  9:51 pm on August 6th, 2013:

    ハワイ louis vuitton

  12. 銀座 louis vuitton  ::  9:52 pm on August 6th, 2013:

    ルイヴィトン 財布

  13. パリ louis vuitton  ::  9:53 pm on August 6th, 2013:

    ルイヴィトン louis vuitton 財布

  14. louis vuitton バッグ  ::  9:54 pm on August 6th, 2013:

    バッグ louis vuitton

  15. louis vuitton アウトレット バッグ  ::  9:56 pm on August 6th, 2013:

    正規取扱店店舗 – 購入激安

  16. louis vuitton 財布 激安  ::  9:57 pm on August 6th, 2013:

    ルイヴィトン 店舗

  17. バッグ 通販 ブランド  ::  9:57 pm on August 6th, 2013:

    louis vuitton 価格

  18. louis vuitton アウトレット バッグ  ::  9:59 pm on August 6th, 2013:

    louis vuitton 財布 アウトレット

  19. louis vuitton ブランド  ::  10:00 pm on August 6th, 2013:

    louis vuitton e store

  20. louis vuitton 財布 楽天  ::  10:00 pm on August 6th, 2013:

    louis vuitton 財布 楽天

  21. louis vuitton サンダル  ::  10:00 pm on August 6th, 2013:

    louis vuitton 新作 財布

  22. ルイヴィトン louis vuitton 財布  ::  10:07 pm on August 6th, 2013:

    louis vuitton 心斎橋

  23. louis vuitton 財布 クロコ  ::  10:09 pm on August 6th, 2013:

    財布 louis vuitton

  24. louis vuitton マトラッセ  ::  10:10 pm on August 6th, 2013:

    louis vuitton セール

  25. 財布 ルイヴィトン  ::  10:10 pm on August 6th, 2013:

    の激安

  26. 財布 louis vuitton  ::  10:11 pm on August 6th, 2013:

    louis vuitton 札幌

  27. louis vuitton bag  ::  10:12 pm on August 6th, 2013:

    を低価格でご提供する激安通販

  28. louis vuitton 新作  ::  10:12 pm on August 6th, 2013:

    《 通販特集 》

  29. louis vuitton 財布 激安  ::  10:21 pm on August 6th, 2013:

    louis vuitton プラダ

  30. louis vuitton アウトレット  ::  10:22 pm on August 6th, 2013:

    韓国 louis vuitton

  31. louis vuitton アウトレット 店舗  ::  10:27 pm on August 6th, 2013:

    louis vuitton 仙台

  32. louis vuitton 福岡  ::  10:28 pm on August 6th, 2013:

    財布 ブランド 一覧

  33. louis vuitton matelasse  ::  10:30 pm on August 6th, 2013:

    楽天 louis vuitton

  34. louis vuitton イタリア  ::  10:32 pm on August 6th, 2013:

    正規取扱い|並行輸入代理店

  35. 楽天 louis vuitton  ::  10:33 pm on August 6th, 2013:

    格安販売店

  36. 財布 ブランド 一覧  ::  1:09 am on August 7th, 2013:

    激安販売店舗!

  37. louis vuitton outlet  ::  1:21 am on August 7th, 2013:

    louis vuitton 楽天

  38. louis vuitton イタリア  ::  1:26 am on August 7th, 2013:

    【送料無料/即納あり】

  39. Cheap Designer Toddler Clothing Blog  ::  5:37 pm on September 13th, 2013:

    Hatch A Plan And Get

    […] n will be a massive summer windfall for lobbyists and trade groups that are alr […]