Tuesday, April 15, 2008

Senate Finance Committee testimony

Today (April 15, natch) was the day. Here is the link to my full written testimony. The three main points I covered were base-broadening, rationalizing business taxation, and filing and compliance simplification for lower and middle class taxpayers.

In some other parallel universe, I will tell my enthralled grandkids "Yep, I was the lead-off witness at the first Senate Finance Committee hearing that led to the great Tax Reform Act of 2009." Not as likely, alas, in the one we actually inhabit. While I would settle for the universe where it happens except for the realistic detail that the grandkids don't care, I don't think we are in that one either.

Turnout by the Senate Finance Committee members exceeded the insiders' over-under, totaling 7 at the peak. Someone had forecast only 5 because the farm bill was in conference, or something like that. Senator Baucus, the Chair of the Committee, showed up for a bit despite the farm bill because he wanted to make the point that tax reform is a big priority for him. Others who asked questions included Bingamon, Wyden, Kerry, and Bunning. Occasionally a question would take the form of "Isn't it true that my bill, which I already know you like, would be a good idea?" At one point I leaned over and whispered to Michael Graetz: "Objection, leading the witness." But other questions had more of an information-evoking flavor, I suppose.

The panel had a lot of consensus, except that Jason Furman questioned studies Graetz and I mentioned suggesting that these days the incidence of the corporate tax may fall on labor due to international capital mobility. And Jason spoke up for traditional capital export neutrality, which Graetz noted is in question these days after I had ducked the question a bit by noting the proposal (by economists Rosanne Altshuler and Harry Grubert) to enact a "burden-neutral" repeal of deferral, thus keeping overall U.S. tax burdens on outbound investment about the same but without all the wasteful tax planning associated with playing deferral or subpart F games.

I'll confess that I thought for a second of Robert DeNiro in "Analyze This!" saying to a petrified Billy Crystal that "I'm going to be seeing a lot of you!" when a couple of our hosts made the same suggestion to us in connection with the possibility that Congress in 2009 will be seriously pursuing fundamental tax reform. But there really doesn't seem to be much buzz about the topic even though the stars arguably are aligning in various ways (rising AMT liability, expiring tax cuts, etc.).

One thing I could imagine them taking up, however, is simplification for lower and middle class taxpayers, meaning greatly eased filing. This has some aspects of win-win, although inevitably some people's taxes would go up if the substantive law changed in a revenue-neutral fashion. It is bound to have foes however done, but has the potential (for once) for politicians to score points because they actually deserve to. I am reminded of the fact that renewing driver's licenses used to be an excruciating experience and then was made simple. Not all that unrealistic an analogy for most wage-earners' tax returns, albeit not entirely lacking in tough choices.

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