The Senate Finance Committee has released the first in a series of discussion drafts containing tax reform options for the committee to consider as members debate overhauling the tax code. One of the options presented to simplify the code is to repeal the alternative minimum tax, which is applied to private activity bonds and increases their borrowing costs.

The nine-page option paper, "Simplifying the Tax System for Families and Businesses," released Thursday is a compilation of ideas from majority and minority staffs from the Finance Committee, as well as input from committee members.

The paper stresses that the options are not necessarily endorsed by either chairman Max Baucus, D-Mont., or ranking minority member Orrin Hatch, R-Utah.

"Members of the committee have different views about how much revenue the tax system should raise and how tax burdens should be distributed," the paper said. "In particular, committee members differ on the question of whether any revenues raised by tax reform should be used to lower tax rates, reduce deficits, or some combination of the two."

Many of the reform options listed in the paper are broad principles and don't address more controversial issues such as whether to lower individual and corporate tax rates or limit certain tax deductions and tax expenditures such as municipal bond interest.

It's unclear how much influence this option paper would have on the committee's debates over tax reform.

House Ways and Means Committee chairman Rep. Dave Camp, D-Mich., has released three discussion drafts on reducing the tax code's burdens on small businesses without consulting the committees, sources have complained.

At a recent committee hearing, Rep. Lloyd Doggett, D-Tex., expressed concern that committee leaders appear to be ignoring some of work of 11 recently created bipartisan working groups on tax reform.

"I'm less confident about how productive in assuring the public interest is represented in this revision, how the working groups are operating," Doggett said. "In fact, one of them is meeting as we convene here now, with groups that are interested in what is happening in the energy code. They do provide some insight but they do not really provide an opportunity for all of the members to participate in all of these really important groups. I think that process is not as productive."

The paper recommends simplifying the federal tax code to "reduce the need for many complex provisions to limit the ability of some taxpayers to benefit from certain deductions, credits, exemptions, and exclusions."

Under this section, an option would be to repeal provisions that require taxpayers to calculate their tax liability multiple times, including repeals of the individual alternative and corporate minimum tax, the personal exemption phase-out, and phase-out of itemized deductions.

Another section titled "miscellaneous" would improve government transparency by providing taxpayers with a receipt for taxes paid.

Under this section, an option would be for the Internal Revenue Service to provide every taxpayer who files an individual tax return with an itemized receipt, which shows the taxpayer's average tax rate, marginal tax rate, as well as the value of the expenditures they claim and/or an allocation of their tax payments to the major spending categories in the federal budget.

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