House Ways and Means Committee Democrats are urging Chairman Dave Camp, R-Mich., to craft tax reform legislation in a bipartisan manner in the House. Given the chaos over the past few weeks, the clear path for passage of comprehensive legislation in the House is one that garners a governing majority through Republican and Democratic votes. In a letter yesterday, House Democrats emphasized that the recent shutdown and near default indicated that tax reform is unlikely to happen if Republicans try to go it alone.
The lawmakers noted that the Tax Reform Working Group was a good start and that the next step is to discuss tax reform legislation together. “We acknowledge that our approaches to tax reform have significant differences. We believe that everyone should pay their fair share of taxes,” wrote the lawmakers. As an example, they cited the Joint Committee on Taxation estimates that lowering the top individual and corporate tax rates to 25 percent and eliminating the Alternative Minimum Tax, as proposed in the House-passed budget, would cost more than $5 trillion.
“In setting any rate, it is vital to determine what effective policies should be reflected in our tax code,” said the Democrats. “In order to make the difficult task of tax reform a reality, it is essential to sit down and earnestly discuss tax policies that will strengthen American families and enhance U.S. competitiveness.”
Meanwhile, a new report from the Congressional Budget Office predicts that corporate taxes will rise as percentage of the nation’s gross domestic product (GDP) in the next few years, before dropping off in 2016. According to a post on CBO’s website on October 24, the agency said that, since 2008, corporate income taxes have been lower than the historical average of 1.9 percent of GDP, largely due the economic recession that reduced corporate profits. Other reasons for the lower level of corporate tax receipts include a temporary tax provision that allowed firms to accelerate their deductions for investments in equipment between 2009 and 2013.
According to the CBO, corporate tax receipts will decline to their historical average by the year 2023 as profits shrink. “The relative decline in profits is expected to stem from increases in corporations’ interest payments, growth in the share of national income going to workers, and increased deductions for investments as the stock of business capital rises due to the economic recovery,” the CBO said.
The report comes on the heels on an earlier CBO post that also found that low- and moderate-income taxpayers face higher marginal tax rates in 2013, due to federal and state individual income taxes, federal payroll taxes and the phasing out of benefits from the Supplemental Nutrition Assistance Program.