Rep. Chris Van Hollen Pushing for Tax Reform

Posted September 30, 2011 at 5:23pm

With the question of taxes bedeviling every effort this year to achieve a major deal on the deficit, at least one member of the super committee is pushing revenue changes that he thinks could actually make it to the president’s desk.

Since Democrats on the Joint Committee on Deficit Reduction insist that any cuts to entitlements such as Medicare or Social Security be paired with comparable revenue increases, Rep. Chris Van Hollen told Roll Call that he has begun exploring proposals to revise the tax code to produce revenue in ways that Republicans might also be able to support.

In an interview last week, the Maryland Democrat declined to say who might be on board with his effort but acknowledged he was working on it.

“I’ve had conversations with other Members of the committee on this issue,” Van Hollen said. “I do think it’s fair to say that this is an idea that could gain bipartisan support.”

According to sources, Van Hollen has been talking to super committee Republicans, including House Ways and Means Chairman Dave Camp (Mich.) and Sen. Rob Portman (Ohio), about provisions in last year’s Bowles-Simpson plan for deficit reduction, which would cut tax expenditures and reform deductions to bring in more revenue, especially from the highest-earning Americans. The Bowles-Simpson plan came from the president’s commission on deficit reduction.

“The concept is to build on some of the ideas put forward in Simpson-Bowles, but do it in a way that could make more policy sense and be more politically achievable,” Van Hollen said.

Republican aides familiar with the push expressed some concern that the Maryland Democrat is focusing only on individual tax reform as opposed to corporate tax changes, and they said the changes suggested won’t be deficit-neutral. They acknowledged, though, that conversations are taking place and added that many members of the super committee, including Camp, Portman, Senate Finance Chairman Max Baucus (D-Mont.) and Sen. Pat Toomey (R-Pa.), are discussing tax reform ideas both openly in hearings and behind closed doors.

Of course, Van Hollen is not operating off script. Democrats have been pushing for many of the same goals that President Barack Obama has championed since August — increasing revenues from wealthy households, implementing the “Buffett rule” to ensure that millionaires do not pay lower tax rates than middle-class Americans and countering the GOP argument that lower-class families do not pay enough taxes because they do not contribute to federal income tax. Republicans, on the other hand, are reluctant to make any changes that would increase taxes at all, but some have expressed openness to revenue-neutral tax reform.

Outside the negotiating room, pressure continues to mount on the 12 bipartisan, bicameral lawmakers charged with finding at least $1.2 trillion in savings over the next decade. Late last week, the National Association of Manufacturers, the Business Roundtable and the U.S. Chamber of Commerce, a traditionally conservative coalition, sent letters to super committee members.

“Put simply, Congress must reform entitlement programs and comprehensively restructure the U.S. tax code,” the letter said, which was also signed by 151 local and state chambers of commerce.

Even Van Hollen conceded that the panel may not be able to reach consensus. After all, even the Bowles-Simpson group fell short of the votes needed to approve its framework. But lawmakers who voted for that deficit reduction plan continue to publicly champion the tax code reform proposals — which could be indicative of future expanded support.

Since the creation of the super committee in August’s deal to raise the debt ceiling, lawmakers of both parties have said their work this fall has been made easier by the blueprints created by other working groups, from Bowles-Simpson to the Senate’s bipartisan “gang of six.” In the Bowles-Simpson recommendations made last winter, the panel essentially suggested blowing up the tax code and eliminating all but a handful of popular tax deductions.

Van Hollen said he is not endorsing specifics of the Bowles-Simpson plan or capping tax expenditures at 4 percent of the gross domestic product — like former Reagan chief economic adviser Martin Feldstein recently suggested in the Wall Street Journal —  but he believes enough bipartisan coalitions have supported such tax code reform, including Sens. Ron Wyden (D-Ore.) and Dan Coats (R-Ind.), that it “could provide room for finding common ground.”

Van Hollen is pushing an overall cap on the amount of deductions, instead of the wholesale elimination that the Bowles-Simpson group recommended. He said he thinks the panel could implement tax code reform without changing the marginal tax rate by instead addressing the discrepancies in deductions — a concession that he said could be key to gaining Republican support.

Four current super committee members — Camp, Baucus, Co-Chairman Jeb Hensarling (R-Texas) and Rep. Xavier Becerra (D-Calif.) — also served on the Bowles-Simpson commission, but all voted against it.

For his part, Baucus has used public hearings to openly highlight the complicated questions facing the panel if it wants to push forward with tax code reform, questions that underscore the challenge in enacting politically difficult reforms in a matter of weeks. He mentioned costly tax changes to the alternative minimum tax and the Medicare “doc fix” as issues that would need to be addressed.

“But it is just really the question: Where do we want to go?  And do we want to have AMT indexed, for example?  Do we want to have SGR, the physicians’ payment rate?  Do we want to increase taxes for middle-income Americans beginning 2013, or upper income, or not?” Baucus asked in the super committee’s second public hearing. “These are basic questions we are going to have to ask ourselves, and they all have consequences, really.”