Chairman Camp Opening Statement: Hearing on Fundamental Tax Reform

January 20, 2011 — Opening Statements   

Washington, DC – Ways and Means Chairman Dave Camp (R-MI) today delivered opening remarks at the Committee on Ways and Means Hearing on Fundamental Tax Reform.  Below are excerpts, followed by the full remarks.

The Tax Code
“Clearly, the tax code is too complex, too costly, and takes too much time to comply with.  All this adds more burdens on families and employers – making it more difficult to create jobs in this country.

“I am under no illusion that the task before us will be easy.  To really reform the tax code in a way that lowers the tax rate, broadens the base, and promotes the competitiveness of American companies, we will need to make some tough choices.”

Tax Reform Requires both Bipartisan Effort and a Conversation with American People
“I don’t think this can be, nor should it be, a partisan exercise.  And it cannot happen just because one Chamber passes a bill.  It will require the active participation of all Members of this Committee.  It will require us to work with the Administration.  And yes, we will even have to talk to the Senate.

“More importantly, we will talk to the American people – individuals, families, employers (large and small) – who are actually impacted by the laws we pass here in Washington.”
 

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The Committee will come to order.

We meet today, in our first hearing of the 112th Congress, to begin what I expect will be a long discussion – and one that I hope will be bipartisan – on the need to reform our federal income tax system.

As I did on Tuesday, let me again extend my appreciation to the Ranking Member for agreeing to allow this hearing to move forward today, even though the Committee did not officially organize until two days ago.

Twenty-five years ago, a Democratic House and a Republican Senate sent to the White House, and the President signed, landmark legislation known today in the tax world as “The 86 Act.” 

That law, which marked the successful culmination of years of work, broadened the tax base and lowered tax rates.  It remains the basis of our system of taxation.

But it is, in some sense, a shell of its former self.

In the intervening years, Members of Congress – from both sides of the aisle – have loaded the tax code with a dizzying array of credits, deductions, exclusions, and exemptions.
 
The late economist David Bradford once provided a tongue-in-cheek example to illustrate the concept of tax expenditures and why they are little more than disguised spending. 

Bradford proposed to cut the defense budget for weapons procurement to zero, while creating a new Weapons Supply Tax Credit that could be claimed by defense contractors for appropriate weapons “donated” to the Pentagon. 

Under this regime, it would appear to the untrained eye that both spending and taxes would be reduced, thus allowing elected officials to claim that government was “smaller.”  But in reality, nothing would have changed.  A spending program would still exist; it just would be cleverly disguised as a “tax cut”.

Bradford’s cautionary tale seems all too real to those who have parsed the tax code and its mysterious tax expenditures for congressionally blessed industries and activities, both big and small.

Regardless of the merits of any individual tax expenditure, the broader picture is not a pretty one.

The President’s deficit commission that I served on, along with the gentleman from Wisconsin, Mr. Ryan and the gentleman from California, Mr. Becerra, measured the impact of these expenditures in terms of higher tax rates.  The Bowles-Simpson report makes clear that taxpayers foot the bill for those expenditures in the form of higher tax rates. 

The Bowles-Simpson report called for eliminating all tax expenditures and would moved individual income tax rates to 8, 14, and 23 percent and dropped the corporate tax rate to just 26 percent.  And if their plan used all of the higher revenue from eliminating tax expenditures to push down tax rates, those number rates would have been even lower.

As we will hear from Nina Olson, the Taxpayer Advocate, the impact of the changes to the tax code to create, expand, and extend these expenditures can be measured by the tens of thousands of additional pages added to the code or the thousands of changes enacted in the last decade alone.

Clearly, the tax code is too complex, too costly, and takes too much time to comply with.  All this adds more burdens on families and employers – making it more difficult to create jobs in this country.

I am under no illusion that the task before us will be easy.  To really reform the tax code in a way that lowers the tax rate, broadens the base, and promotes the competitiveness of American companies, we will need to make some tough choices.

I don’t think this can be, nor should it be, a partisan exercise.  And it cannot happen just because one Chamber passes a bill.  It will require the active participation of all Members of this Committee.  It will require us to work with the Administration.  And yes, we will even have to talk to the Senate.

More importantly, we will talk to the American people – individuals, families, employers (large and small) – who are actually impacted by the laws we pass here in Washington. 
 
So, this is just the first hearing of many.  I have asked our witnesses to confine their remarks at this first hearing to defining the problems of the current income tax system.

I look forward to hearing from many other witnesses, and working with all of you, as we undertake this enormous challenge.  As we do so, we will have many further opportunities to consider various solutions.  But today, our focus should be on making sure we begin to understand the scope of the challenge.

With that, I yield to my friend, the Ranking Member. 

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SUBCOMMITTEE: Select Revenue Measures    SUBCOMMITTEE: Full Committee