U.S. Senate Finance Committee Ranking Member: We Must Understand The Federal Tax Code Before We Can Reform It
Republicans on the U.S. Senate Finance Committee last week released a report on the federal tax code. In a forward to the report, Sen. Orrin Hatch (R-Utah), who will become chairman of the committee in January, said he would make tax reform his highest priority in the new Congress.
While Sen. Hatch warned passing tax reform would be difficult, he was optimistic his goal could be achieved once everyone involved in negotiations understood the complexities of the tax code. He wrote, “[T]ax reform will be far more difficult and complicated than anything that can be boiled down to a simple slogan. It will involve balancing countless interests and making difficult choices among numerous competing priorities. … Part of the difficulty is natural, given that we live in a complex world with a complex economy. The key is to understand the complexities and wade through them to engineer a tax system that enhances efficiency, fairness, and simplicity. Living in a complex world does not mean that we should accept or promote additional complexities from the tax system.”
Some of the complexities the report discusses, include the Internal Revenue Service’s handling of:
- Overseas profits;
- Corporate dividends;
- Income paid to and withheld by foreign persons; and
- Foreign manufacturing.
The report also outlines how many individuals and corporations pay no federal income taxes and provides the average tax rates for the last 30 years. The S-Corp Association, an MSCI ally, also noted the report supports comprehensive tax reform – reform that would alter both the individual and corporate tax systems. As Connecting the Dots has noted on many occasions, MSCI will support tax reform only if it is comprehensive in nature and seeks to make the tax code fairer for all of its members, the majority of whom file their federal taxes under the individual system.