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Senate Committee on the Budget Holds a Hearing on Tax Reform

2 min readBy: Alex Wood-Doughty

The Senate Committee on the Budget held a hearing yesterday on “TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Reform: A Necessary Component for Restoring Fiscal Responsibility.” Chairman Kent Conrad opened by calling for a bipartisan effort to fix the current tax system.

C. Eugene Steuerle, Chair of the Urban Institute, stated that no one favors our current tax system and that something needs to be done:

[W]e must move into an era of fundamental reform-one that no longer centers simply on growth and multiplication of programs. Large systemic reforms require fundamentally different strategies than those simple tax cuts and benefit expansions that seem only to identify “winners.”

Donald B. Marron, Director of the Urban-Brookings Tax Policy Center, came out strongly against tax expenditures:

My message is simple: the income tax is riddled with tax preferences. These preferences narrow the tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. , reduce revenues, distort economic activity, complicate the tax system, force tax rates higher than they would otherwise be, and are often unfair.

Dr. Rosanne Altshuler, Professor of Economics at Rutgers, urged lawmakers to sit down and come up with a fundamental tax reform, rather than continue the petty debates that usually bog down Congress:

Instead of spending the next two years engaging in an endless debate of whether to extend the 2001 and 2003 tax cuts, I urge you to focus on building support for and designing a base-broadening reform of the current system that can reduce our future unsustainable debt burdens and enhance the growth of the U.S. economy and the wellbeing of Americans.

The panelists all agreed that the tax code is too complex and were united in calling for a fundamental reform that broadens the base and lowers rates, something the Tax Foundation has supported for a long time (see here, here, and here). Hopefully the Senate Committee on the Budget can come together in a bipartisan way and create a reform that is simple, transparent, neutral, and stable.