On Thursday, January 29th the Democrats on the Senate Finance Committee (hereinafter “the Committee”) issued a letter to the Republican Chairman, Orrin Hatch, R-Utah, outlining their main principles for tax reform that emphasizes first that the tax reform process should go through “regular order” and not the budget reconciliation process. “Reconciliation imposes tight restrictions, such as the Byrd rule, that could inhibit our work by forcing us to focus on procedural intricacies rather than good tax policy,” said the Senate Democrats in their letter. “Using, or even the implicit threat of using, the reconciliation process for tax reform would destroy the necessary bipartisanship that made the 1986 reform effort so successful.” Other principles cited by Senate Democrats include making reforms more progressive than current tax policy, and reducing the differential between taxes on capital gains and wage income.

The Committee also called for more certainty for businesses and middle-class families by permanently extending and improving some tax credits, particularly in the areas of education, training and retirement savings. “When applying this principle, any reform package must take into account the varying cost of living differences among states and regions, and ensure that all middle class families are protected regardless of where they live,” the senators added.

Also emphasized was the need for any tax reforms to support domestic jobs, production and manufacturing, presumably aimed at ending tax breaks that encourage companies to move jobs offshore. It was further stressed that any tax reforms would need to provide enough of a revenue base to meet the country’s needs for investing in infrastructure, protecting retirement security for today’s senior citizens and future generations, and providing education and job training for young people. The final primary principle emphasized the need to ensure that the corporate tax system is internationally competitive to keep America’s economy growing.

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Washington National Roundtable