Photograph by Andrew Harrer/Bloomberg

The Internal Revenue Service (IRS) headquarters in Washington, D.C.

Written with Peter Cook

The scandal at the Internal Revenue Service is emboldening the chief congressional proponents for rewriting the tax code, they said in an interview with Bloomberg Television.

“This actually leads to new momentum for tax reform,” said Senate Finance Committee Chairman Max Baucus in a joint interview with House Ways and Means Committee Chairman Dave Camp.

The pair spoke in the Capitol today in an interview with BTV’s Peter Cook for the “Capital Gains” program airing May 19.

Camp, a Michigan Republican, will lead the first legislative hearing tomorrow into the IRS’s selective scrutiny applied to small-government groups applying for tax-exempt status.

Groups with “tea party” or “patriot” in their names got tougher questions and experienced longer delays than others in a practice that the IRS admitted May 10.

“Now we understand the fear the IRS can put into people,” Camp said.

Baucus, a Montana Democrat, will follow with a hearing May 21.

Steven Miller, acting commissioner of the IRS, resigned yesterday. Today, President Barack Obama named Danny Werfel, controller of the Office of Management and Budget, as acting commissioner.

Camp and Baucus have been working together on rewriting the tax code to broaden the tax base and lower marginal rates. They’re cooperating even though they disagree on whether a tax rewrite should generate more revenue. Baucus says some tax changes should pay for deficit reduction; Camp disagrees and wants rate reduction only.

Original post is IRS Scandal Good for Tax Reform: Baucus, Camp, in Interview by Political Capital.

Photograph by Tom Williams/Roll Call/Getty Images

Rep. Dave Camp, R-Mich., right, Chairman of the Joint Committee on Taxation (JCT), walks with Sen. Max Baucus, D-Mont., Vice Chairman, to a discussion of the JTC on the topic of reforming the U.S. Internal Revenue Code.

Welcome to Taxreform.gov — a new bipartisan entry on the Internet sponsored by Rep. Dave Camp, Republican chairman of the House Ways and Means Committee, and Democratic Sen. Max Baucus, chairman of the Senate Finance Committee.

Camp says he is “committed” to getting a tax overhaul out of his committee this year. Baucus, who will retire at the end of 2014, is working on a bill but can’t say for sure that his committee will produce one this year. They’re reaching out to the public for ideas as they move forward.

Bloomberg’s Richard Rubin writes about the “Max and Dave” tour underway, which comes with more than a website — there’s a Twitter handle too: @simplertaxes.

The two are talking about a zero-based approach to writing a new federal tax code that has undergone 15,000 amendments since 1986.

“What we’re trying to do is set up a framework where we don’t take the current tax code and see what individual thing we pull out — we take a blank piece of paper and start over,” Camp said in an interview on National Public Radio’s “Morning Edition” today. “There has been a lot of layering upon layering and tinkering of the tax code. The complexity is really the big thing that we’re going to try to get at.”

“One thing I know we agree on, and I know the American public agrees on, is loopholes, which allow corporations, many corporations, not to pay any income taxes,” Baucus said. “That’s just not right… When we start from scratch, start from no deductions, no credits, no exclusions, that puts the burden on them as those who want those provisions to state a better case as to why they should be there.”

The big question is what comes out of this potential tax reform: A gain in federal revenue that the White House is seeking, or the “revenue neutral” result of no additional revenue the House’s Republicans are demanding.

“That’s the fundamental question that’s being asked in this debate,” Baucus said. “My sense is, like a lot of things in this town, that we’re going to have to compromise. There is going to be some rate reduction. There is going to be some revenue raised.” The amount, he said, is what will have to be negotiated.

“I think that’s getting to the end game before we get there,” Camp said. “I can tell you right now most of my caucus is not in favor of more revenues. They think we did that at the end of last year. We’ve got to move forward on getting the policy right and working together to get the best possible tax code and then we’ll resolve those issues.”

While Camp promises a bill this year, Baucus is less confident: “We’ll see. I don’t know. I cannot answer that question definitively. It depends on how quickly we can get an agreement in our committee…

“We’ll reach a point where I think we’ll pass legislation,” Baucus said. “And if it’s good legislation that tends to make some sense, then it’s more likely that Majority Leader Harry Reid will want to schedule it on the floor, and it’s more likely that we’ll be able to pass it with 60 votes.”

Original post is Zero-Based Tax Reform: Camp, Baucus (‘Max and Dave’) by Political Capital.

Photograph by Alex Wong/Getty Images

The Oversight Subcommittee of the House Ways and Means Committee on Capitol Hill in Washington, DC.

That thud you just heard was a 568-page pile of tax policy hitting desks around Washington.

The nonpartisan congressional Joint Committee on Taxation released its summary today of the U.S. tax system (444 pages), various proposals to change it (45 pages) and comments submitted to bipartisan working groups of the House Ways and Means Committee (68 pages).

Lawmakers are planning to use the report as a guide as they try to rewrite the tax code this year and next. In a joint statement, Ways and Means Chairman Dave Camp and top Democrat Sander Levin called the report “an important and comprehensive overview” of the tax system.

“The committee will dig into its details over the coming weeks,” they said.

The report is mostly a compilation of previously released information on our complicated tax system. It’s chock full of minutiae, from the depreciation period for municipal wastewater treatment plants (15 years) to the maximum adoption credit ($12,970).

Happy reading!

Original post is Lawmakers Get 568 Pages of Tax Code Guidance by Political Capital.

Photograph by Andrew Harrer/Bloomberg

A Home Depot a store in Washington.

Generalities about the need to lower tax rates obscure the difficulty of rewriting the tax code — and the benefits of some of the oft-derided tax breaks, Representative Richard Neal said today.

Neal, a Massachusetts Democrat, spoke in Washington to the RATE Coalition, a group of companies that backs a lower corporate tax rate and a broader tax base. The group’s members include The Home Depot Inc., Macy’s Inc., and United Parcel Service Inc.

Loose descriptions of tax breaks as “loopholes” ignore how important some of them are, Neal said. In particular, he praised the New Markets Tax Credit, saying it helped redevelop a theater in Pittsfield, Massachusetts, in his district. He also said the research and development tax credit and the Build America Bonds program are important items that lawmakers should consider keeping as they work to expand the tax base.

Neal praised the efforts of Representative Dave Camp, the Republican chairman of the Ways and Means Committee, for providing a “road map” for overhauling the tax code.

“The problem,” Neil said, “is there aren’t any street signs.”

Original post is Tax Reform: `No Street Signs’ by Political Capital.

Photograph by Katherine Frey/The Washington Post via Getty Images

Congressman Dave Camp with Warren Payne, Policy Director for the Committee, right, before a hearing prep in the House Ways and Means Capitol office in Washington, DC.

Senate Democrats’ attempts to raise taxes this year will run into a problem: a House determined to starve it of revenue bills.

Under the Constitution, revenue measures must start in the House, limiting the Senate’s ability to raise or lower taxes if the House doesn’t send it a tax bill. That’s exactly what the House is planning to do.

The House doesn’t intend to advance any tax bills to the Senate until it passes a comprehensive overhaul of the entire code, said Ray Beeman, an aide to Rep. Dave Camp, chairman of the House Ways and Means Committee.

The House typically passes tax bills each year, either small-bore simplification measures designed for popular appeal around the tax filing deadline or broader bills, such as the repeal of the health care law, that include revenue items and can be stripped and replaced in the Senate.

Beeman, who is drafting the overhaul bill that Camp plans to push through his committee this year, spoke on a panel today at the Tax Executives Institute conference in Washington.

If the Senate wants to raise taxes, “they’re not going to have a vehicle with
which to do it,” said Nick Giordano, a Democratic tax lobbyist who also spoke
on the panel.

Original post is House Won’t Pass Tax Bill Without Code Overhaul: Beeman by Political Capital.

Photograph by David Paul Morris/Bloomberg

Larry Ellison, chief executive officer of Oracle Corp., at the Oracle OpenWorld 2011 conference in San Francisco.

Technology and pharmaceutical companies such as Cisco Systems, Oracle and Johnson & Johnson have formed a new coalition to push for lighter taxes on income earned outside the U.S.

The LIFT America Coalition — that’s Let’s Invest for Tomorrow — will urge Congress to adopt a so-called territorial tax system that would exempt most income earned around the world. Most other major industrialized countries use such a system.

Currently, companies face U.S. taxes on income they earn around the world; they can defer that tax until they bring the money home and offset it with foreign tax credits.

The biggest challenge in designing such a system is creating rules that prevent companies from shifting the U.S. tax base abroad. Rep.Dave Camp, chairman of the House Ways and Means Committee, suggested options to prevent such “base erosion” in 2011 that some companies objected to.

Other members of the group are Procter & Gamble., United Technologies and International Business Machines.

In part because of the U.S. tax code, companies have stockpiled about $1.9 trillion in profits outside the country.

“Having competitive tax rates and a competitive territorial system are worthy goals that ultimately increase confidence, create certainty, and ensure good jobs for America,” Greg Hayes, the chief financial officer of United Technologies said in a statement. ” These reforms will enable both old and new companies with American headquarters to succeed today and in the future, sharing their products, services, talents and technologies with the world.”

Original post is Techs, Pharmaceuticals Seek Territorial Taxation by Political Capital.

Photograph by Saul Loeb/AFP via Getty Images

People walk as snow falls during a late winter storm at the U.S. Capitol in Washington on March 6, 2013.

The snow-delayed draft of proposed tax changes for small businesses will be unveiled next week — weather cooperating, of course — by Representative Dave Camp, chairman of the House Ways and Means Committee.

The proposal, which Camp had intended to release today, will be the third segment of his tax-code overhaul plan; previously released parts concerned international taxation and levies of financial products.

Ways and Means Republicans discussed the proposals affecting small businesses behind closed doors today on Capitol Hill, as most of official Washington was shuttered due to the storm that in the core city delivered far fewer flakes than predicted.

The lawmakers, while declining to offer many of the proposal’s details, said they hoped to simplify the tax code and adjust accounting rules. Most small businesses pay their taxes on their owners’ individual returns.

“I come from a small business,” said Representative Mike Kelly, a Pennsylvania Republican elected in 2010 who owns car dealerships in the Pittsburgh area. “I know how difficult it is. There’s nothing more confusing for most of us than this tax situation we’re in.”

The proposal may include a set of changes to the rules governing S corporations that have been pushed by Republicans Dave Reichert, a Washington Republican, and Ron Kind, a Wisconsin Democrat, Reichert said today.

Original post is Tax Rewrite Plan — Snarled by Storm — Set for Release Next Week by Political Capital.

Photograph by Andrew Harrer/Bloomberg

A police officer rides a bicycle past the Capitol on Feb. 12, 2013.

The Congressional Budget Office says it should have sought more outside voices to look at a Jan. 8 report on international tax policy options.

The nonpartisan agency responded today to concerns raised by Rep. Dave Camp, chairman of the House Ways and Means Committee, who favors a so-called territorial tax system that would exempt most income earned outside the U.S. from U.S. taxes.

“We continue to believe that it presents the key issues fairly and objectively and that its findings are well grounded in economic theory and are consistent
with empirical studies in this area,” Douglas Elmendorf, the CBO director, wrote in a letter today. “Nevertheless, because of the complexity of the subject and the diverse views of experts in the field, we agree that it would have been desirable to seek comments from more outside reviewers.”

The study came as legislators continue to explore ways to overhaul the tax code and address the system that has led companies to stockpile more than $1 trillion in untaxed profits outside the U.S.

The dispute between Camp and CBO follows a similar spat between Senate Republicans and the Congressional Research Service over a report on the economic consequences of tax rates on top earners. In that case, Democrats said Republicans were trying to politicize a nonpartisan agency’s study.

In his Jan. 24 letter to Elmendorf, Camp, a Republican from Michigan, wrote the study was “heavily slanted and biased in favor of one specific approach,” the idea that there should be no tax difference for U.S. companies choosing between domestic and international investments.

The report, Camp wrote, failed to “provide an equal and balanced review of proposals on territorial taxation.”

In his response, Elmendorf defended the study and the options it considered.

Original post is CBO Addresses Camp Criticism of Global Tax Study by Political Capital.

Photograph by Adam Bird/Bloomberg

Representative Dave Camp, a Republican from Michigan and chairman of the House Ways and Means Committee, speaks at a Rotary Club meeting in Midland, Michigan, in this file photo.

House Ways and Means Committee Chairman Dave Camp wants to break his panel into smaller working groups to tackle specific aspects of tax reform, Bloomberg BNA’s Marc Heller reports.

Ray Beeman, tax counsel to the committee, said in a webinar sponsored by Deloitte Tax LLP that Camp, a Michigan Republican, plans to have the bipartisan groups focus on subject areas that have yet to be defined. Camp is working with the committee’s ranking Democrat, Sander Levin of Michigan, to create the working groups, he said.

“I really think it’s an outreach effort,” Beeman said, adding that the groups’ main task will be to collect facts and at some point come back with a report. Camp has said he intends to pass a comprehensive overhaul of  tax policy by the end of this year.

The groups will probably call upon stakeholders in tax issues but wouldn’t hold public hearings of their own, he said. The plan for informal groups sheds light on Camp’s approach as he works to craft a proposal, though they can’t deal with every tax issue that a comprehensive bill will address, Beeman said.

One of those issues is likely to be an examination of the tax code’s Section 501, which governs the treatment of exempt organizations, according to Bloomberg BNA’s Diane Freda.

Because Congress is looking at changing revenue streams for Section 501 limitations on deductions, there will be a need for a wider conversation about that section, a Senate Democratic aide, whom BNA didn’t identify further, said at a joint meeting of the Great Lakes, Gulf Coast, and Pacific Coast Area Tax Exempt and Government Entities Councils and the Mid-
Atlantic and Northeast Pension Liaison Groups.

The imposition of mandatory amounts of charity care for tax-exempt hospitals — which some institutions had feared under past proposals by Senator Charles Grassley, an Iowa Republican — isn’t garnering much attention now, as sequestration takes center stage, the aide said. Even so, a re-examination of the effectiveness of the 2010 health-care law may follow once Section 501 has been implemented.

Original post is Camp Considers Working Groups to Tackle Tax Reform by Political Capital.

Photograph by Mladen Antonov/AFP via Getty Images

A cardboard cut-out of President Barack Obama in a tent defending “Obamacare” at a street fair in Charlotte, North Carolina.

The 2010 health-care law that’s expected to expand insurance coverage to 27 million Americans in the next decade isn’t cheap: About $1.2 trillion through 2022.

There’s another cost, less well known: The time Americans will spend complying with the law and its requirements. And that figure may be even more jaw-dropping: About 127.6 million man-hours per year and counting, according to the House Ways and Means Committee.

The committee — chaired by Michigan Republican Dave Camp, no fan of President Barack Obama’s Affordable Care Act — unveiled today what it calls the “Obama-care Burden Tracker.” The online tool relies on data produced by the Obama administration itself as it writes regulations implementing the health law.

Under a law called the Paperwork Reduction Act, federal agencies have to calculate how much time the nation’s citizenry will spend complying with their regulations. The burden is reported in hours as part of regulatory filings, and is summed up in a report from the White House Office of Management and Budget each year.

In 2011, for example, Americans spent about 9.1 billion hours on federal paperwork, according to the most recent report. In that context, the health-care law will only increase the public’s bureaucratic burden by about 14 percent.

“With many rules and regulations yet to come, these 127 million burden hours — many of them due to complying with new taxes — are just the tip of the iceberg,” Camp said in a statement.

Some of the burden, though, is voluntary.

For example, the most burdensome regulation yet issued under the 2010 health-care law relates to an optional tax credit available to small businesses that insure their workers. Complying with those rules alone would cost Americans about 40 million hours a year, the Obama administration says; perhaps an indication why many small businesses aren’t bothering.

A spokeswoman for the White House budget office, asked about the Ways and Means burden tracker, didn’t dispute Camp’s math. She noted that Obama has repealed some of the government’s regulatory burden, including a proposal yesterday to dump a handful of rules for hospitals in the Medicare program that the administration considers unnecessary or obsolete.

“From the start, the Administration has taken a balanced regulatory approach, focusing on putting in place lifesaving protections, while eliminating tens of millions of hours of paperwork burdens for our nation’s citizens and businesses,” said the spokeswoman, Jessica Santillo, in an e-mail. “As part of this approach, President Obama has launched an historic review of existing rules on the books to streamline, modify, or get rid of those that cost too much or no longer make sense, an effort that is already on track to save billions of dollars.”

Original post is Health-Care’s Added Cost: Compliance by Political Capital.