Today, the House Ways and Means Committee held a hearing to evaluate the policy ramifications of short-term extensions versus making the expired tax provisions permanent.

In his opening remarks, Chairman Dave Camp said, “As we explore what tax reform means to the American economy and for American families, we must move away from short-term tax policy and work towards greater certainty in the tax code. When I released the draft, the first item I asked for public feedback on was the extenders and our revenue baseline. The question is not only about the merits of the individual policy, but how we should treat the revenue gained or lost by either making those policies permanent, reforming them or repealing them. Today’s hearing will help the Committee find answers to these questions.” Camp added, “One thing everyone in this room can agree on is that today’s tax code is too complex.  And, one of the best examples of the complexity of our current tax code is so-called tax extenders and their temporary status. As such, job creators are left constantly guessing if a group of policies are going to be around next year. Families and employers literally don’t know what tax benefits they will be able to take advantage of from year to year.  Yet, when examining some of these provisions, such as the research and development tax credit, we find out that some have been around for the thirty years or more.” 

Camp continued, “Specifically today, we will address the research and development credit, small business expensing, active financing exception, depreciation for certain race horses, CFC look-through, and two S-corp provisions.  It is important to note that most of these provisions have had bipartisan support in the past. . . .By supporting permanent policies, Washington can promote certainty for American businesses and generate additional economic growth.  But, the Committee’s work will not end here, this is just the beginning of the conversation that we must have in order to overhaul the tax code so it is simpler and fairer for families. You have heard it from me before, and you will continue to hear it:  We can no longer accept the status quo. Washington needs to wake up to this reality and start offering concrete solutions and debating real policies that strengthen the economy and help hardworking taxpayers. Tax reform is one way we can do that.”

The witnesses were:

Ms. Judith Zelisko

Vice President of Tax, Brunswick Corporation

Testimony

Mr. Bob Stallman

President, American Farm Bureau Federation 

Testimony

Mr. James Redpath

Managing and Tax Partner, HLB Tautges Redpath, Ltd

Testimony

Mr. Joshua Odintz

Partner, Baker & McKenzie LLP

Testimony

Mr. Thomas Hungerford

Senior Economist and Director of Tax and Budget Policy, Economic Policy Institute

Testimony

Highlights from today’s testimony include:

Ms. Zelisko stated, “Brunswick is an ardent supporter of a strong and permanent R&D incentive.”

Mr. Stallman testified, “Long-standing tax provisions, like Section 179 small business expensing which help farm and ranch businesses cash flow, should be made permanent at the 2013 level.”

Mr. Redpath said, “In addition to the permanent BIG holding period reduction and charitable deduction provisions, the draft includes the expansion of qualifying beneficiaries for electing small business trusts to include nonresident alien individuals. This provision would allow businesses to continue to be owned and operated by a family even as the family grows beyond the borders of the United States.”

Mr. Odintz testified, “While some provisions may be temporary by design (as stimulus measures, for example), AFE and CFC look-through are designed to be permanent tax policy.”

Mr. Hungerford stated, “I think the appropriate question regarding the tax extenders is which ones should remain in the tax code and which ones should be eliminated, rather than asking if they should be permanent or temporary. Some may have outlived their usefulness, others were never effective, and still others achieve important economic goals. Congress would be justified in keeping those that (1) correct a market failure, (2) are appropriately targeted, (3) do not unduly compromise the progressivity of the income tax, (4) do not add excessively to the complexity of the income tax, (5) avoid economic disruptions, and (6) are more cost-effective than a direct expenditure program.”