A Hill report from yesterday adds detail to the rumblings over the past week that the House Ways and Means Committee Republicans are putting together a discussion outline for tax reform. According to The Hill:
Sources say GOP lawmakers on the House Ways and Means Committee are working on a draft proposal that would shift the U.S. to a so-called “territorial” tax system, in which companies would basically only be taxed on profits made within American borders.
The Ways and Means plan would not be a fully drafted bill, but instead a proposal that would allow business groups and other stakeholders to offer suggestions.
As of now, it is not clear when the panel will release its scheme, though some lobbyists expect it as soon as Friday.
The Hill report was followed by a Bloomberg story this morning confirming the activity at Ways & Means. According to Bloomberg:
U.S. Representative Dave Camp, chairman of the House Ways and Means Committee, said that he is working on legislation that would shift the U.S. to a territorial system of taxing overseas profits and that the bill will be released “hopefully soon.”
.The release of legislation would mark a shift to a new phase of the corporate tax debate and signal Camp’s interest in tax code changes alongside what the supercommittee might accomplish. The 12-member panel is charged with creating a 10- year plan to cut at least $1.5 trillion from the federal deficit by Nov. 23. Automatic across-the-board spending cuts would take effect if Congress doesn’t pass a plan by Dec. 23.
So we have several tracks of activity on tax reform - the Ways and Means process designed to flesh out what tax reform might look like and the on-going push in the Super Committee to include something in their recommendations, both on top of increasing pressure to do something on “jobs.” Just how these camps of activity might come together, or if they would come together, is entirely unclear.
Also unclear is the scope of the Ways and Means draft. Does it include corporate-only reforms or something broader? And how will pass-through businesses be treated under this proposal?
Chairman Camp has been adamant up to this point that tax reform needs to be comprehensive and include both the individual and corporate sides of the code. And, we hope that it is made clear that whatever is released is not a departure from that position.
Considering this increased activity, S-Corp and other allied trade associations have been hitting the Hill making the case for comprehensive reform that House Republicans have been pushing for the past year, ensuring that pass-through employers do not end up paying for corporate tax reform. We support corporate reform, but it needs to be part of a broader package that recognizes that most Americans work for a pass-through business, not a C corporation.