The House Ways and Means Tax Policy Subcommittee held another hearing on July 19 examining comprehensive tax reform. In particular, the subcommittee discussed the individual side of the tax code. The previous hearing focused on corporate tax reform (TAXDAY, 2017/07/14, C.2).
“As a committee, we now have a choice. We can accept high tax rates and a confusing code or we can grow the economy, lower taxes for everyone, and create a fair system that Americans can trust,” Chairman Peter Roskam, R-Ill., said during opening statements. According to Roskam, everyone is in agreement that the need for tax reform is long overdue. How exactly to achieve that goal successfully, however, is where the differences lie.
Former Ways and Means Chairman Bill Archer, R-Tex., testified during the hearing, encouraging taxwriters to “complete the long, delayed goal of simplifying and rationalizing our tax code.” Archer discussed his time in the committee and acknowledge the difficulty of accomplishing true reform. The difficulty arises, in part, because there is a support group for every provision of the code, he said.
According to Archer, there is one essential goal of any tax system, to which the U.S. should return its focus—”to raise those monies needed to fund our government’s activities in a simple and understandable fashion that does not place huge administrative and time burdens on our citizenry.”
Bernard McKay, chair, Council for Electronic Revenue Communication Advancement (CERCA), encouraged lawmakers to embrace “common sense solutions” for simplifying the tax code. “Some of the most common difficulty and confusion today comes from the use of what may seem to be basic concepts in the current tax code, but which in the real world represent great confusion for taxpayers,” McKay testified. As an example, he referenced the term Adjusted Gross Income (AGI) as a term that “most taxpayers don’t know what it means or to what it applies.”
McKay provided an additional example of complexity: how the term “dependent” is used in the tax code. “There are a half dozen different and conflicting definitions of the term dependent, which apply to various tax provisions,” he said.
Ranking member Lloyd Doggett, D-Tex., discussed his concerns with the tax code’s treatment of retirement benefits. According to Doggett, 60 percent of American households get only 16 percent of the retirement tax incentive benefits. “We have a system where many working families are not adequately prepared for retirement,” Doggett said.
Eric Rodriguez, vice president of the Office of Research, Advocacy and Legislation for UnidosUS, echoed that focus, testifying that” we have to find more ways to incentivize those at the lower end to be able to save for retirement.” The wealth gap across the country is due in part because of the way the tax code incentivizes savings primarily accruing at the top, he added.
Rodriguez also testified about the ways in which he believes the House Republicans tax reform blueprint and the Trump administration’s tax proposal would accelerate the current wealth divide.” These tax plans would provide massive tax breaks to the wealthiest Americans and tilt the playing field even further in their direction at the expense of middle-class and working families,” Rodriguez said. According to Rodriguez, a lower tax rate on pass-through business income, as proposed by the Trump administration, would result in the 400 highest-income taxpayers receiving an average of roughly $9 million in tax cuts in 2018.
By Jessica Jeane, Wolters Kluwer News Staff
Ways and Means Press Release: Chairman Roskam Opening Statement
Testimony of Former Ways and Means Committee Chairman Bill Archer
Testimony of CERCA Chair Bernard McKay
Testimony of Jania Stout, Practice Leader and Co-Founder of Fiduciary Plan Advisors at HighTower
Leveling the Playing Field: The Effect of the Tax Code on Inequality—Submitted by Eric Rodriguez, Vice President, Office of Research, Advocacy and Legislation, UnidosUS