WASHINGTON — Rep. Pat Tiberi, chairman of a House Ways and Means Committee panel, on Tuesday called for the elimination of most tax expenditures as part of comprehensive tax reform, which he said should be as pro-growth as possible and simplify the tax code.
The Ohio Republican, who chairs the select revenues subcommittee, plans to hold a series of tax reform hearings starting next week to examine the more than 200 tax expenditures in the tax code, which include tax-exempt municipal bond interest.
“Not every tax expenditure or extender is created equal,” Tiberi said at a tax reform policy summit sponsored by the National Journal.
Tiberi said he and his colleagues will be guided by at least two policy principles in determining whether to eliminate or retain various tax expenditures: whether they have provided economic growth and whether they are consistent with what their original authors intended.
“We need to do a good job of oversight as members of Congress and that’s what we plan to do next week,” he said. “What we should do is look at trying to create a system where we lower the rate for everybody and get rid of as many of those expenditures as we can. Folks might not like some of the expenditures that we get rid of, but you might like the fact that we get the rate down,” Tiberi told those attending the summit.
Many Republicans have coalesced around the idea to lower the top income tax rate to 25% from 35%, as outlined by House Budget Committee chairman Rep. Paul Ryan, R-Wis., in his controversial 2013 budget plan.
Lawmakers focused on tax reform also will take into account the effective versus the marginal tax rate that Americans pay, Tiberi said.
As a result of tax expenditures, Americans pay a much different tax rate than the actual rate, Tiberi said, adding that policymakers need to move away from picking winners and losers in the tax code.
The congressman proposed “getting rid of some tax expenditures that don’t impact 90% of Americans,” such as those that affect perhaps 10%, 20% or 30% of Americans. However, he was careful not to specify which tax expenditures would face the chopping block, claiming it would not be smart for lawmakers to negotiate the issue in the public arena.
A recent Congressional Research Service report projected tax expenditures will total over $1.1 trillion in fiscal 2014, but said that revenue loss will be highly concentrated. The largest 20 tax expenditures account for as much as 90% of the revenue loss from all tax expenditures and benefit millions of Americans, the report said.
Tax-exempt and tax-credit bonds, which rank 11 out of the top 20 largest individual tax expenditures, would amount to $42.7 billion for fiscal 2014, or 3.6% of all tax expenditures.
Muni market groups have been lobbying Congress to help preserve tax-exemption and stave off proposals made by groups of economic and political experts that would curtail or eliminate tax-exemption for new bonds as a means of cutting the federal deficit.
Tiberi said it is “wishful thinking” for Congress to take up tax reform in the lame-duck session after the November elections. Instead, lawmakers will deal with tax extenders such as the payroll tax, and move into the comprehensive tax-reform agenda in early 2013, he said.
