Advancing Tax Reform Principles

Statement

As the Senate Finance Committee advances tax reform, I remain committed to the hard work of comprehensive fiscal reform, combining thoughtful tax reform with fundamental reforms to mandatory programs. As part of this process I recently had the opportunity to submit a letter to Senate Finance Committee Chairman Max Baucus (D-Montana) and Ranking Member Orrin Hatch (R-Utah) outlining my proposal for comprehensive tax reform. Tax reform needs to be comprehensive to get us past the tired and failed arguments about raising and lowering rates.

The gravity of the problems facing our nation requires serious tax reform as a part of a fundamental fiscal reform plan. We need to move away from our simplistic attachment to the current tax code with its shortcomings, inefficiencies and waste. The most efficient and simplified tax system would be to transition to a low unified flat tax. If this is not achievable, we should completely redesign the tax code with an emphasis on lower rates, broadening the base, reducing complexity and eliminating anti-competitive provisions. In either approach, tax reform must be revenue-neutral.

The Bowles-Simpson Commission outlined proposals that create fairness in the tax code, are pro-growth, and unleash the dynamic potential of our economy. Such comprehensive tax reform would eliminate much of the complexity in the current tax code and lower tax rates for all individuals, families and businesses. Embracing this new paradigm can help generate additional revenues and economic growth and put America's tax code in a more competitive posture.

Following a series of roundtable meetings to explore our current tax code, Chairman Baucus and Ranking Member Hatch solicited feedback from all Senators regarding our tax reform priorities. With this opportunity, I have been able to re-state my key principles for tax reform, which build on the "clean slate" approach I first endorsed as a member of the Bowles-Simpson Commission:

- Simplify the tax code by eliminating deductions, credits and exemptions that cannot be justified by sound tax policy
- Flatten the tax code by reducing the current six-tiered system to no more than three brackets with rates of 8-12 percent, 14-18 percent and 22-26 percent, determined on a revenue-neutral basis
- Comprehensive tax reform will stimulate significant economic growth, resulting in increased revenue. Revenue from dynamic growth in the economy must be scored and accounted for in the calculation of appropriate tax rates.
- Establish a single corporate tax rate between 23 percent and 25 percent
- Move to a competitive territorial corporate tax system
- Include transition rules and make no retroactive change to the tax code

As was recognized in the bipartisan work of the Gang of Six, basic framework principles must be resolved before we can effectively evaluate each credit, deduction and exemption in the current tax code to determine which provisions have a policy justification for being added back to the blank slate tax code, at the expense of proportionately higher rates for all taxpayers. The input I have received from many Idaho families and businesses regarding which of these expenditures are the top priorities for Idahoans will be helpful when the Finance Committee reaches the point in the tax reform process where a full a full evaluation of all tax provisions and their effect on tax rates can take place.

Our tax code is far too long, complex and anti-competitive to serve as the long-term foundation for the economic growth our country needs. Without structural reform, our potential growth and revenues will be lost. Work must continue to deliver to the American people a tax code that meets the needs and challenges of our modern economy.

Source