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Legislative Updates: July 2013

 

Capitol Call

Partisanship seems to be running as hot as the temperature this summer in Washington. No better example can be found than the fate of the Farm Bill. The first version was passed in 1933, and since the 1970s, it has been a combination of farming policies (such as agricultural subsidies and tariffs) and nutrition policies (mostly the food stamp program), made to satisfy both urban and rural constituencies. Its extension every five years has become routine.

However, this year, it passed the House on July 11 with no Democratic votes. They were protesting the stripping out of $20 billion from food stamps over the next 10 years by Republican fiscal conservatives, a move that would essentially sever food stamps from the main bill for the first time in 40 years. Additionally, 12 Republican fiscal conservatives did not vote for the bill because they felt it wasted billions of subsidy dollars on wealthy industrial farmers.

The 216-208 vote was marked by parliamentary delays by Democrats and fiery rhetoric by both sides, and rancor prevailed in Congress as dismay spread for the 532 farming-related organizations that had petitioned for the bill not to be to split in two parts. The Senate, which had passed its more integrated version in June, was waiting to act on the revised House bill at the end of July. Both sides want the final product to be on the President’s desk by September, but there are deep divisions on the Hill as to what it should contain.

In an effort to avoid partisanship on tax reform, House Ways and Means Chairman Dave Camp (R-Michigan) and Senate Finance Chairman Max Baucus (D-Montana) tried bypassing their Congressional colleagues and taking their proposals straight to the people in a “tax reform road trip.” Their first stop was at 3M Headquarters in Minneapolis on July 8. 3M is part of the LIFT America Coalition, one of several industrial groups pressing Washington for tax reform. Employees and executives there implored the Chairmen to simplify the tax code and lower the corporate rate from 35% to 25% to compete with countries like Canada.

Meanwhile back in Washington, Chairman Baucus came up with the interesting idea of starting with a “blank slate” and asking his fellow Senators to defend all the tax expenditures they want to “add back” into the tax code. On June 27, he and a Ranking Member on the Senate Finance Committee, Orrin Hatch, wrote a letter to their colleagues that explained the idea and asked for their input.

Baucus’ theory is that the more tax credits are eliminated, the more revenue is gained and the more flexibility he would have to lower overall rates. He also hopes to bridge any gaps in ideology. “While members of the Senate have different views on whether the revenue raised from eliminating tax expenditure or other reforms should be used to lower tax rates, reduce the deficit or some combination of the two,” Baucus and Hatch wrote, “we believe that every Senator should understand the trade-offs involved when adding tax expenditures back to the tax code.”

This approach, while novel, may be uncomfortable for Senators who have become fond of many popular tax breaks, from child care deductions to retirement savings tax deferrals. For example, Republican Senator Jerry Moran may request to keep a tax credit for ethanol production in the tax code because it benefits many corn farmers in his state of Kansas. But if he neglects to submit support for the mortgage interest deduction, does that mean he opposes it? And if he doesn’t submit a proposal at all, does that mean he favors keeping all existing tax credits or none of them? 

Lobbyists from every interest group affected by the tax code are working frantically to make sure their cause is “added back” by the Senators. Questions still abound about Chairman Baucus’s unusual request and it is unknown whether the proposals from the Senators, which were due by July 26, will be released to the public. If they are, Washington insiders are expected to have a field day. At the very least, it may give the issue of tax reform a higher profile in the drama-filled 113th Congress, where even the venerable farm bill has started a partisan battle.

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