Grassley Amendment Safeguards Tax Reform for Tax Relief

Press Release

Senator Chuck Grassley today offered an amendment to say that tax reform should not be used to increase taxes during Senate committee work on a budget resolution for fiscal year 2014.

Grassley's amendment would make revenue neutral the Budget Committee's instructions for the Finance Committee to submit a tax reform plan by October 1 that raises $975 billion.

Here is the text of Grassley's amendment:

RECONCILIATION INSTRUCTIONS FOR REVENUE NEUTRAL TAX REFORM
Sponsor: Sen. Chuck Grassley (R-IA)
Purpose: To instruct the Committee on Finance to report revenue neutral tax reform.

On page 49 of the Chairman's Mark, strike lines 17 through 22, and insert: SEC. 201. RECONCILIATION INSTRUCTIONS FOR REVENUE NEUTRAL TAX REFORM
The Committee on Finance shall report changes in laws within its jurisdiction necessary to reduce revenues by not more than $1 billion for the period of fiscal years 2014 through 2023.

Here is Grassley's statement to the committee regarding his amendment:

My amendment would ensure that the instruction to the Finance Committee for tax reform is revenue neutral.

I oppose the reconciliation instruction. By calling on the Finance Committee to find $975 billion in revenues as part of reconciliation, the Chairwoman is essentially dooming any tax reform effort to a partisan tax raising exercise. This is not how you achieve meaningful tax reform.

The Chairman and Ranking Member of the Finance Committee recognize this. That is why they have both expressed opposition to a reconciliation instruction for tax reform.

While the budget does not call explicitly for tax reform to be part of the reconciliation process, how else do you suppose we are to find nearly a $1 trillion in new tax revenue?

Senator Enzi has an amendment to strike the reconciliation instruction. I support his amendment. But, if the reconciliation instruction remains in the mark, it should be revenue neutral. Tax reform should not be used to increase taxes.

The budget assumes that the nearly $1 trillion in "savings" can be "found by eliminating loopholes and cutting unfair and inefficient spending in the tax code."

If such large amounts of low hanging fruit exist in the tax code, you would have thought that either Chairman Baucus or I, when I was Finance Chairman, would have gone after some of this along with the billions of dollars in loopholes we have worked to close.

The truth is the Chairwoman's definition of a loophole is so broad as to be void of any real meaning.

And her idea of spending in the tax code is popular deductions widely used by middle class Americans, such as deductions for mortgage interest, charitable giving, and state taxes.

Referring to these tax increases as "savings" or as eliminating "loopholes" or "spending" in the tax code, does not change the fact that to raise nearly $1 trillion the middle class will see a higher tax bill.

Yes, there is clutter in the tax code. There has been a proliferation of tax preferences that should be reexamined.

And tax reform, as I understand it, would eliminate certain preferences in an effort to broaden the base, and lower the tax rates.

The goal of tax reform is to simplify the tax code and make it more efficient. The ultimate goal is economic growth. But, true tax reform should be revenue neutral.
It should not act as a way to increase taxes.

Revenue raised by eliminating tax preferences should be used to lower tax rates.

The assumption in the budget that business and corporate loopholes are available for revenue reduction is particularly puzzling. We currently have the highest tax rate among our major trading partners.

The President has even recognized the competitive disadvantage this puts us in. That's why he has called for reducing the corporate rate from 35 percent to 28 percent.

At a recent hearing before this Committee on tax expenditures, the Democrats own witness, Professor Edward Kleinbard, similarly recognized the need to use revenue from eliminating business tax preferences to lower rates.

In response to my question on whether corporate tax reform should be revenue neutral he responded, "I believe quite strongly we should get the government out of the business of business by reducing the marginal tax rate on U.S. corporations to something in the mid-20s and to pay for that through the elimination of business tax subsidies."

This was the opinion of the Majority's witness.

Raising revenues by closing so-called loopholes or reducing tax expenditures is a tax increase. Unless it's used to offset true tax reform, it's a tax increase that will support even more spending.

Tax reform should be revenue neutral, and my amendment would ensure that the reconciliation instruction to finance is not a back-door effort to further hike taxes.

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