The Obama administration announced Wednesday that it is creating a task force to examine ways to simplify the tax code, close tax loopholes, lessen tax evasion and reduce corporate welfare.
The task force will be part of former Federal Reserve Chairman Paul Volcker’s economic recovery board, and will also take a hard look at recouping taxes deferred by subsidiaries of U.S. multinational companies, according to Peter Orszag, director of the Office of Management and Budget.
{mosads}Orszag said the task force would “be examining ways of being even more aggressive on reducing the tax gap, which could provide funding for tax provisions, including an extension of the Making Work Pay tax credit.”
That $400 tax credit for individuals — $800 for couples — fell to the cutting room floor Tuesday, when Senate Budget Committee Chairman Kent Conrad (D-N.D.) stripped the provision in an effort to reduce the budget deficit. The stimulus bill signed into law, however, ensures qualified taxpayers will receive the tax break through the end of 2010.
The task force will report back to Volcker’s board by Dec. 4, which means it could be a part of a major debate over tax reform in 2010, an election year for House lawmakers and a third of the Senate. Because many of President Bush’s tax cuts expire at the end of 2010, many tax lobbyists are predicting a bill next year.
Orszag said that the administration “does not have a revenue target for the task force,” and that its only “constraint” would be not to tax increases in 2009-2010, and to include no tax increases on families making less than $250,000 a year.
Obama promised during the presidential campaign that 95 percent of Americans would receive a tax cut from his administration.
This drew quick criticism from the U.S. Chamber of Commerce. By taking those making less than $250,000 a year out of the equation, an undue tax burden is likely to fall on big and small businesses, according to Marty Regalia, the Chamber’s vice president for tax and economic policy.
“If you’re really looking for tax reform, you can’t just wall off a section of the tax base,” Regalia said.
Orszag said the president would like Laura Tyson, chairwoman of the Council of Economic Advisers for President Clinton; Roger Ferguson, the CEO of TIAA-CREF; former Securities and Exchange Commission Chairman Bill Donaldson; and Harvard economics Professor Marty Fedelstein to serve on the task force. Orszag told reporters in his office later in the day that a “legal formality” prevents Obama from naming the task force outright.
Estimates of the gap between taxes collected and taxes owed have been made in the range of $300 billion, but Orszag said Wednesday that he and others think this is too low “because of the complexity of some of the transactions that are involved, especially involving international transactions and transfer pricing and a whole variety of other topics.”
Regalia said the focus on deferral, which was included in Obama’s budget, could hinder multinational U.S. companies from competing globally. Obama’s budget estimates that changes to deferral, international enforcement and other reforms could gain $210 billion over 10 years.
Dozens of business groups, including eBay, Pepsi and Whirlpool, wrote congressional leaders on Wednesday urging them to oppose the proposal on deferral, arguing it would reduce the global competitiveness of U.S. companies and harm U.S. workers.
House Minority Leader John Boehner (R-Ohio) offered tepid support for the concept of tax reform but was leery of what he sees as a chance for more tax increases.
“Obviously, the tax code needs reform, but I hope that when the administration talks about generating more revenue that isn’t code for raising taxes,” Boehner spokeswoman Antonia Ferrier said.