The U.S. Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Orrin Hatch (R-Utah) June 27 proposed a “blank slate” approach
for tax reform and called on their fellow Senators to provide proposals for tax expenditures that should be added back to the tax code and improved.
Under this approach, the committee is starting with a “blank slate” in the sense that the tax code has had all of the special provisions removed, including exclusions, deductions, credits and other preferences.
“The complexity, inefficiency and unfairness of the tax code are acting as a brake on our economy,” wrote Baucus and Hatch
. “We cannot afford to be complacent.”
The Senators pointed out that over the past three years they have been working on tax reform, they have held more than 30 hearings and have heard from hundreds of experts.
In addition, Baucus and Hatch had the Joint Committee on Taxation and the Finance Committee staff estimate the relationships between tax expenditures and the current tax rates if the current level of progressivity is maintained. The blank slate approach would allow significant deficit reduction or rate reduction, while maintaining the current level of progressivity. The research found that for every $2 trillion of individual tax expenditures that are added back to the blank slate, each of the seven individual income tax brackets would raise by 1.3-2.2 percent. Likewise, every $200 billion of corporate tax expenditures that are added back would raise the top corporate income tax rate by 1.5 percent.
“Some of the special provisions serve important objectives,” wrote Baucus and Hatch. “Indeed, we both believe that some existing tax expenditures should be preserved in some form. However, the tax code is also littered with preferences for special interests.”
Baucus and Hatch asked their colleagues to formally submit legislative language or detailed proposals for what tax expenditures should be added back in, as long as they: help grow the economy, make the tax code fairer and effectively promote other important policy objectives.