Politics & Policy

The Tax Code Won’t Reform Itself: Give Congress a Deadline

(Outline205/Dreamstime)

Survey after survey shows that Americans hate the tax code, yet it has been decades since it has been significantly reformed.

There are two reasons for this apparent contradiction:

1) The forces against any simplification or reform effort are powerful and willing to do everything they can to block it: Every obscure tax provision in the tax code was secured at great cost and effort, and benefits someone.

2) Congress rarely acts unless it is forced to do so. Deadlines can be useful in forcing action.

Major tax reform is a crucial issue that Congress must address soon in order to help correct the many inefficiencies in the economy and restore the rate of economic growth to historic norms. Nonetheless, major tax reform appears unlikely this year, with Congress planning to recess in July for the fall election. However, Congress can set the conditions for tax reform in the next Congress by passing an innovative bill that will “sunset,” or legislatively terminate, the tax code by the end of 2019.

H.R.27, the Tax Code Termination Act, is authored by House Judiciary committee chairman Bob Goodlatte (R., Va.) with the sole purpose of setting a December 31, 2019, expiration date on the entire tax code, except for Social Security and Medicare.

The bill has attracted broad and bipartisan support, with 129 co-sponsors, including nine full committee chairs, plus House Ways and Means chairman Kevin Brady (R., Texas) and House Tax Policy Subcommittee chairman Charles Boustany (R., La.), members of leadership such as Cathy McMorris Rodgers (R., Wash.) and Greg Walden (R., Ore.), several members of the House Freedom Caucus, and bipartisan support from Minnesota Democrat Collin Peterson.

As Chairman Goodlatte has said, “It has become all too clear that the current code is broken beyond repair and cannot be fixed — we must start over from a blank slate. While I have yet to hear an argument for maintaining our current tax code, I hear argument after argument for why we need a new one.”

“Comprehensive tax reform will not happen overnight,” Goodlatte continued. “But we should not delay taking a first step forward. Setting a date certain for a new tax system is the necessary and prudent first step.”

Just over a year ago, our two organizations launched Sunset the Tax Code, a broad, nonpartisan effort to set a January 1, 2020, deadline for tax reform by passing legislation to terminate the current tax code on December 31, 2019.

We see this legislation as a powerful tool to convince Congress to begin the heavy lifting of rewriting our broken tax code.

That date is soon enough to create real urgency, yet far enough into the future to give Congress ample time to seriously debate many alternative tax plans without spooking the capital markets. We urge the House to pass the tax-code-termination bill before Congress adjourns in July or August. The next step in the legislative process is a Tax Policy Subcommittee hearing on the bill, and then a full Ways and Means Committee markup.

We see this legislation as a powerful tool to convince Congress to begin the heavy lifting of rewriting our broken tax code. It is the catalyst that we need, and it has the support of a majority of taxpayers.

National polling firm McLaughlin & Associates conducted a nationwide survey last summer to learn what voters think about the tax code. They found three conclusions:

1) Seventy-five percent of voters in both parties do not believe the current federal tax code is “generally fair and equitable.”

2) Eighty-five percent believe something must be done to force Congress to get serious about tax before 2020 (only 4 percent disagreed).

3) Seventy percent support terminating the current tax code at the end of 2019 to force tax reform (with only 10 percent opposing).

With tax-reform legislation not moving this year, passing H.R.27 is how Congress can show its commitment to eventual tax reform by setting a deadline for action that will bring both sides together and begin the national debate for a new tax code.

We know that Speaker Paul Ryan and Chairman Brady share a passion for tax reform and have groups working on it with hope that such legislation can move in the next Congress.

While Ryan and Brady are new to their current leadership roles, we know from past history that despite good intentions, other issues arise, crises occur, and year after year no tax reform passes.

A deadline is required, and H.R.27 is simple and clear.

Any tax reform is helpful. Any reduction in rates or simplification of the code would be pro-growth.

But despite the best efforts of the House Ways and Means Committee, there is simply no real urgency on Capitol Hill right now to pass broad-based reform.

Former Obama White House chief of staff Rahm Emanuel was fond of saying, “Never let a crisis go to waste.”

We prefer a less sinister truism: “Nothing focuses the mind like a deadline.”

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