Don't Mess With Taxes

They're baaaaack!

Representatives and Senators returned Jan. 6 to Washington, D.C., this time with both chambers under Republican control.

Rep. John Boehner (R-Ohio) was selected House Speaker for the third time. And once again, Boehner had to fight off conservative insurgents in his party. Boehner got a total of 216 votes, with 25 Republicans voting for someone else or "present" as a protest of what they see as too conciliatory of an approach by the Speaker in dealing with President Obama.

Across Capitol Hill, Sen. Mitch McConnell (R-Ky.) takes over as Majority Leader of the Senate from Sen. Harry Reid (D-Nev.). Reid wasn't on hand for the transfer of power. He is recovering at home from injuries he sustained in a New Year's Day fall while exercising, but the new Minority Leader addressed his colleagues via a video.

Night view of the U.S. Capitol Dome, which is undergoing a major restoration project. Image courtesy of the Architect of the Capitol. Click it for more information and updates on the work.

Public dismay with government: Republicans obviously are thrilled to be in control of both the House and Senate and say they are ready to show that they can govern.

But like the U.S. Capitol Dome at the center of the two legislative chambers, Congress itself is in need of some serious renovation, specifically when it comes to repairing the public's opinion of it.

U.S. residents recently told Gallup pollsters that their government is the "most important problem" facing the country. An average of 18 percent of Americans ranked "government/Congress/politicians" as their chief concern.

Issues with government and lawmakers led the list of concerns, edging out the economy, which 17 percent of Americans said was the country's most important problem.

General vs. specifics on tax reform: Taxes were specifically named in the poll, but tax reform is on GOP lawmakers' 114th Congress to-do list.

Obama, McConnell and Boehner all have repeatedly announced support for tax code changes, especially on the corporate side. All agree that a lower business tax rate would help end corporate inversions.

But they are much further apart on individual tax reform, which many Democrats say must be addressed, too.

During a half-day conference just days after the November 2014 midterm elections, Washington, D.C., heavy hitters from Capitol Hill and the private sector offered their thoughts on what's next for tax reform.

"It's shortsighted to focus exclusively on business tax," said Todd Metcalf, chief tax counsel for the Democrats on Senate Finance. Many businesses, especially smaller ones, are taxed only on the individual side as Schedule C income.

"There's a lot of loudness about the business side of code -- it's antiquated, doesn't work in the modern economy, is an outlier in global tax policy -- but the individual side is messed up, too," said Metcalf. "There are 14 benefits for higher education. A Treasury study found that 70 percent of those who avail themselves of education benefits didn't take the one that would have been best for them."

Involvement by all needed: The consensus at the Nov. 6, 2014, conference, sponsored by Bloomberg BNA and KPMG, was that the key to comprehensive tax reform is engagement by all parties.

Former House Ways and Means Chairman Dave Camp (R-Mich.), who retired at the end of the last Congressional session, introduced his wide-ranging tax reform proposals as official legislation just before the lame duck session ended in December. Sen. Orrin Hatch (R-Utah), the new chair of the Senate Finance Committee, also dropped his tax reform measure into the hopper.

Of course, those bills must be re-introduced in the new Congress. And Camp is gone. Former GOP veep candidate Rep. Paul Ryan (R-Wisc.) now heads the House tax-writing panel and has his own tax reform ideas. But at least there's been a start, however halting, toward tax reform on Capitol Hill.

Now, say tax watchers, it's time for the executive branch to step up.

"We really need the Administration to engage. The U.S. Treasury must be part of this. Treasury involvement, putting together its version of a Camp draft, is a minimum first step," said Warren Payne, majority (i.e., GOP) policy director at Ways and Means, at the November event.

But the Treasury had a legit reason for its hesitancy.

"The problem of the Administration not taking a stance is because it knew, or at least believed, the GOP would reject it immediately," said Richard Rubin, federal tax policy writer for Bloomberg News, pointing to the rejection by Republican members of the he Simpson-Bowles budget deficit reduction plan even though they worked on the measure.

Will the 114^th Congress be able to overcome such partisan bickering in order to craft meaningful tax reform?

Or will the next Gallup poll find even more people citing government as the country's major problem?

You also might find these items of interest:

• Tax code still ginormous, but growth has slowed a bit
• Sen. Tom Coburn's latest Wastebook: a tax code decoder
• Could costly, but popular, tax breaks be axed in tax reform?