Tax Reform Calls Multiply

Bloomberg’s Ryan Donmoyer and Rich Miller report this morning that no decisions have been made yet whether President Obama will back tax reform. They report Treasury Secretary Tim Geithner will meet January 14th with corporate CFOs to continue the discussion.

Yesterday, Senate Majority Leader Harry Reid (D-NV) told reporters, “The country is ripe for tax reform…our tax system is broken and needs to be fixed.” He said it would be one of his first priorities. Senate Minority Leader Mitch McConnell (R-KY) added, “We all know the tax code is a disaster, and any effort to simplify the tax code, to get the rates down to make it more fair, I think we’d be open to discussing that.” House Majority Leader Eric Cantor (R-VA) and House Minority Whip Steny Hoyer (D-MD) both called for tax reform earlier this week.

Wednesday, the White House told the Wall Street Journal that President Obama will address the U.S. Chamber of Commerce on February 7, a week before he releases his FY12 budget. He could use the opportunity to back tax reforms which the business community wants very much.

The difficulty will be that passing meaningful tax reform without raising the deficit will leave more firms with a net tax increase that is politically viable, and similarly for the individual income tax. The Tax Reform Act of 1986 passed because a large tax increase on businesses was used to lower rates for individuals. That’s not going to happen this time around, and I don’t see where the money is going to come from to reduce the numbers of businesses and individuals with a net tax increase from tax reform.

About Pete Davis 99 Articles

Affiliation: Davis Capital Investment Ideas

Pete Davis advises Wall Street money managers on Washington policy developments that affect the financial markets. President of his own consulting firm since 1992, Davis Capital Investment Ideas, he draws on 11 years of experience as a Capitol Hill economist with the Joint Committee on Taxation (1974-1981), the Senate Budget Committee (1981-1983), and Senator Robert C. Byrd (1992). He worked in the House and Senate, and for Republicans and Democrats.

Davis brought the first computer policy model, the Treasury Individual Income Tax Model, to Capitol Hill in early 1974, when he became a revenue estimator on the Joint Committee on Taxation. He formulated the 1975 rebate, the earned income tax credit, the 1976 estate tax rates, the 1978 marginal tax rates, and the Roth-Kemp tax cut. He left Capitol Hill in 1983 for the Washington Research Office of Prudential-Bache Securities, where he advised investors for seven years.

Davis has long written a newsletter on the Washington-Wall Street connection for his clients; Capital Gains and Games is his first foray into the blogosphere.

Visit: Capital Gains and Games

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