Tax Reform a Must this Fall

This summer, Senate Finance Chairman Max Baucus (D-MT) and ranking member, Sen. Orrin Hatch (R-Utah), sent letters to each senator requesting input on comprehensive tax reform legislation. The Senators advocated for scrapping the entire tax code and rebuilding it one page at a time, defending inclusions on an individual basis.

Parallel to that, Representative Dave Camp (R-MI), the Chairman of the House Committee on Ways and Means, proposed a similar measure. In fact, Senator Baucus and Representative Camp toured the country to discuss this issue, including here in the Twin Cities region.

See coverage from the Pioneer Press here: http://goo.gl/uhvxZy

See an editorial from fellow Fix the Debt members and former Congressmen Mark Kennedy and Tim Penny here: http://goo.gl/bTVuYH

And on a somewhat related note, President Obama entered the tax reform discussion, pledging to lower corporate tax rates and broaden the base to increase revenue in the short-run to pay for programs and investments he believes will grow the economy.

While momentum seems to have slowed of late, and while Washington faces a slew of fiscal issues this fall, including the sequester, the expiration of funding for the government, and the approaching debt ceiling, I hope and believe that tax reform is still a real possibility.

For one, tax reform goes hand in hand with any fiscal talks – particularly when the goal is to get spending in order without cutting off needed revenues. Put simply, it is an essential step toward forging a comprehensive, bipartisan deficit-reduction deal.

Moreover, it just makes too much sense. On both the corporate and individual sides of the tax code, perverse incentives encourage businesses and individuals to make decisions based on how to best minimize tax liability, rather than on ways that would benefit the overall economy. All of the quirks and carve-outs in the code distort the economy and create a system that is overly-complicated and is rightly viewed as unfair. The tax code’s various deductions, exemptions, and loopholes – collectively called “tax expenditures,” or spending through the tax code – represent $1.3 trillion in lost revenue for the Treasury this year alone.

And although tax reform should help decrease the deficit, it must be done in such a way that encourages economic growth for businesses like 3M and for companies like mine. It has become clear that tax reform may best be accomplished in the context of a large, comprehensive deficit-reduction agreement. We need comprehensive and pro-growth tax reform that will broaden the tax base, lower marginal rates, raise revenues for the federal government, and lower the deficit.

The Campaign to Fix the Debt – of which I am a member – will continue to work with Congress and the Administration as they pursue such an agreement. I hope Washington listens – because this is an important issue for all of us here in Minnesota.

To get involved, please always remember to visit fixthedebt.org.