New Podcast Interview with Sen. Max Baucus

August 8, 2006

We’ve posted our regular Tuesday “Tax Policy Podcast” this morning. This week’s guest is Sen. Max Baucus (D-MT), Ranking Democratic Member on the Senate Finance Committee. He discusses efforts to allow free electronic tax filing, the U.S. “tax gap,” and the prospects for fundamental tax reform.

Here’s a clip from the transcript on the repeal of the federal telephone excise tax, and Sen. Baucus’ take on the liklihood of progress toward federal tax reform this year:

Hodge: “There’s an old saying, the closest thing to immortality is a government program. Well it appears that the tax code is somewhat the same, with that old Spanish American War telephone tax. As far as my history goes, the Spanish American War was fought and done with 108 years ago. Tell us what’s happening on that front. I understand the IRS has abandoned a portion of that tax, but what is the Senate doing for the remainder of repealing it?”

Baucus: “Well Scott it’s a very interesting point, it’s kind of a bothersome point. As you said, the Spanish American War was over a hundred years ago. There was an interesting statement by Henry Cabot Lodge that said, “The war of the United States with Spain was very brief. Its results were many, startling, and of world-wide meaning.” Well the trouble is this federal excise tax was not brief. It has lasted, someone did the calculation and it’s more than 39,000 days. The Treasury did repeal and stop collecting the federal telephone excise tax for long-distance calls, but kept the excise tax for domestic calls. Well the problem is it’s a very regressive tax, everyone’s paying it right now, and I just think it’s wrong, it should be repealed. I’ve introduced legislation that’s passed the Senate Finance Committee repealing totally the federal telephone excise tax. I hope to get it passed this year. I very much hope that the Majority Leader Frist brings it up so we can get it passed.”

Hodge: “I do want to finish our conversation on the topic of tax reform. The President had appointed a blue ribbon panel last year which reported a package of reform proposals last November. But that seems to have been sitting on a shelf somewhere over at Treasury. The whole issue of tax reform seems to have stalled. What were your thoughts about he panel’s recommendations, and why isn’t there more support for tax reform? What would you do to jump start it?”

Baucus: “Well Scott it’s a good question. There’s a lot of support generally for tax reform. But I think there’s a sense in the Congress that if we’re going to get real tax reform, if we all just approach this with an open mind, suspend judgment, and listen to various points of view so that we can pass the ball, and that would include simplification. Clearly, the code is way, way too complex and that’s one of the reasons frankly why we have this tax gap. Then when we do tax reform we have to be upfront in knowing who wins and who loses, because whenever there are changes in the tax law, and the more significant the changes are, the more some people will come out ahead and pay less taxes and some will come out behind and end up paying more taxes. And we just need to know who they are. If the proposals, and that was the case with the President’s tax reform panel, are truly revenue neutral, because if they are neutral in the average, in the aggregate someone’s going to come out ahead and someone’s going to come out behind if we make any changes.

“Then they also got to make sure any reform panel is transparent, everybody knows what’s going on. It’s also important to remember that we’re a big country, a huge country, which some people analogize to a battle ship or aircraft carrier. It’s kind of hard to spin on a dime, and people get used to and they kind of know what the current system is. The devil you know is sometimes better than the devil you don’t know. But that shouldn’t prevent us from trying to get more meaningful reform.

“My guess is that to be honest not much is going to happen this year. It’s already getting close to August, but I’m very hopeful that the President, that a good common sense, good faith proposal comes forward with tax reform. Now we’re also waiting for Treasury because the last panel the president put together they gave recommendations to Treasury, but the Treasury’s kind of sitting on it. The Treasury hasn’t done anything with them yet. Maybe they’re waiting until next year. We’ll see.”

Hodge: “Well it will be interesting to watch the developments and I do hope that the Senate, and the Congress, and the White House can move on this sooner rather than later.”

Baucus: “Boy, isn’t that the truth. It really is, but you know what, unfortunately elections are coming up and that can stall thing. And also the Senate, the Congress does not have many legislative days, to be honest about it, between now and November. But it’s a good opportunity to sort of take stock and try to figure out at the beginning of next year how we can get the ball rolling here.”

Hodge: “Well Senator, thank you very much for taking time out of your busy schedule. I appreciate it and I appreciate your views very much, and appreciate you taking time with us.”

Baucus: “Thanks Scott. Thank the Foundation too, you guys do really good work.”

Check out the full interview here. If you’re an iTunes user, be sure to subscribe to our podcast here.


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