WASHINGTON — House Speaker John Boehner, R-Ohio, on Thursday said the Joint Committee on Deficit Reduction “is a jobs committee” that should also lay the groundwork for broad tax reform.
Speaking before the Economic Club of Washington, Boehner said the U.S. tax code “rewards special interests” and “needs to be fundamentally reformed.”
“The joint select committee can tackle tax reform, and it should,” Boehner said, but he acknowledged the short timeframe for the committee — its recommendations are due by Nov. 23 — means it’s “probably not realistic” that the 12-member body will have time to “rewrite the tax code.”
He called for the so-called super committee to consider ways to lower individual and corporate tax rates while closing tax “deductions, credits, and special carveouts.”
Members of the municipal bond community were broadsided earlier this week when President Obama’s revenue offsets portion of his jobs bill called for a 28% cap on tax-exempt interest, as well as tax exclusions, expenditures, and deductions for high wage-earners.
Sources agree the president’s effort to hitch revenue increases to his jobs plan is not going to gain traction with Republicans.
Boehner acknowledged this, saying tax hikes “are not a viable option” for the super committee. He added it is “too early to determine” if Obama’s jobs bill will be considered by the panel.
The president next week is expected to make specific recommendations to the super committee.
Observers say it is unclear to what extent the committee will address tax reform.
“I think what Boehner and others are trying to say is, 'We don’t expect you to write an 800-page bill,’ ” said Frank Shafroth, director of the Center for State and Local Government Leadership at George Mason University.
But the committee is being called on “to adopt a framework” that would instruct the House Ways and Means Committee and Senate Finance Committee to proceed with tax reform, he said.
“There are a majority of members [of Congress] that want something” done on tax reform, Shafroth said. “The devil is in the detail,” and debating tax reform gets “really hard as you’re entering the final year going into a big election,” he said.
However, the super committee has the independence and authority to establish a tax reform framework ahead of elections, Shafroth said.
Congressional members have gotten “someone else to do the heavy-lifting and say, 'This shall be done,’” he said.
On the Obama jobs proposal and tax-exemption issue, Shafroth said the White House has shifted the dialogue for state and local governments, suggesting that their debt is not on the same plane with federal debt.
“The real scary thing here is that you have equated state and local bonds, as opposed to Treasury bonds, as being somehow a tax expenditure lumped in with everything else,” Shafroth said.
The Obama proposal has “fundamentally changed the discussion” going forward for state and local tax-exemption as a tax expenditure, he said.
Separately, Boehner said the House “will repeal the 3% withholding rule,” which would require federal, state, and local governments to withhold 3% on contracts of $10,000 or more they have with outside vendors.
Implementation of the rule, signed into law in 2006, was pushed to Jan. 1, 2013, by the Internal Revenue Service in May. States and localities have said eliminating the rule is a top priority because it could cost them millions of dollars.
