October 18, 2012
On October 16, National Journal convened a policy summit
entitled, “On the Edge: Navigating America’s Looming Fiscal Cliff.” The summit included several panels consisting of members of Congress and budget and tax policy experts.
The first panel was a moderated discussion between Republican Chief Deputy Whip and Ways and Means Committee member Peter Roskam (R-IL) and Vice-Ranking Member of the House Budget Committee Allyson Schwartz (D-PA). Both panelists agreed that additional revenue is necessary but differed on whether that meant taxes must be increased. Roskam believes that new revenue should be achieved through growth and Schwartz believes that tax rates should be increased for higher-income individuals and that an agreement to avoid the fiscal cliff cannot be revenue neutral. Both agreed that tax code reform is needed and that reforming the corporate tax side will be easier than reforming taxes for individuals.
The second panel included John Buckley, former Chief Democratic Tax Counsel for the House Ways and Means Committee, and John Traub, former Republican Staff Director for the House Ways and Means Committee. Buckley suggested that any deal reached on taxes or spending cuts during the lame duck session will be driven by what the Senate is able to pass. He also raised the possibility that Congress may pass legislation during the lame duck session that delays resolving many of the spending and tax issues until next year, adding that he does not believe there is any prospect of anything substantive happening before the end of the year.
When asked what would be the new trigger for Congress to act if the fiscal cliff is averted in December through legislation extending the deadlines, Traub responded that the debate over increasing the federal debt limit in the first part of the year will trigger action and Buckley answered that market reaction may force action.
In comparing the current atmosphere with the one surrounding The Tax Reform Act of 1986, the panel commented that 1986 tax reform followed years of Republicans and Democrats working together to pass other major legislation, which allowed the parties to build up trust with each other. When discussing the difficulty of tax reform, Buckley brought up the mortgage interest deduction (MID) specifically, stating that he does not think Congress will repeal the MID and that he thinks it would be a reckless policy to repeal it given the status of the housing market. Traub and Buckley agreed that it is very unlikely that Congress will separate corporate and individual tax reform.
The final panel consisted of Douglas Holtz-Eakin, a former director of the Congressional Budget Office (CBO), and Stephen Bailey, who has served as a tax staffer for Senate Budget Committee Chairman Kent Conrad (D-ND), the senior tax counsel for the Super Committee, and as a staff member for the National Commission on Fiscal Responsibility and Reform. Both panelists were pessimistic about the chances of any major deals being reached during the lame duck session.
Holtz-Eakin stated that he believes Congress has until next August to come up with a deal before the capital markets react. He added that there has been a 30-year stand-off between Republicans and Democrats over raising taxes and reforming entitlements. Bailey added that from his experience with the Super Committee, he thought revenue would be on the table as long as changes to health care were also on the table. The panel highlighted that there are few members on the tax-writing committees that were involved in the 1986 tax reform legislation, and so tax reform will be a new process to most members.