Wyden-Gregg tax reform plan would create 2 million jobs a year, new study says
A conservative think tank said Wednesday that a tax reform proposal by Democratic and Republican senators would create about 2.4 million jobs a year over the next decade.
The figure, produced by a Heritage Foundation study that will be released in the next few days, was touted by both Sen. Ron Wyden, Oregon Democrat, and Sen. Judd Gregg, New Hampshire Republican, on Wednesday at a forum to promote their proposal.
Gregg said their plan would have a “massively positive effect” on government revenues without raising taxes, and said that most Americans making less than $200,000 would pay less under their plan than they do now.
Gregg and Wyden expressed some optimism that their bill could be voted on this year, although most observers don’t believe that will happen with such a large piece of legislation during an election year. Yet the senators stressed that they were offering real ideas on an issue they feel will be unavoidable in the coming months.
“This is not an academic exercise,” Gregg said at the Bipartisan Policy Center. “Congress is going to have to move on this issue because the dynamics of the deficit are going to force them to.”
The centerpiece of their plan is to simplify the tax code and to dramatically lower the corporate income tax rate for businesses, from its current 35 percent level to 24 percent. Anti-tax groups say this would not get the U.S. below the European average of 25 percent after state taxes are added in, but that it would be a big step toward retaining and attracting more business.
In order to lower the rate, Wyden and Gregg offset the loss in revenues by eliminating a large number of tax deductions and exemptions.
Ryan Ellis, with Americans for Tax Reform, which is often quick to label proposals tax increases, said the elimination of the deductions and exemptions in the Wyden-Gregg bill was not a tax increase.
“The unified bill as a whole is a net tax cut,” Ellis said.
The Heritage Foundation released a report Wednesday praising the elimination of the deductions and exemptions.
“There are too many credits, deductions, exemptions and other provisions in the tax code, each of which requires special paperwork and detailed record-keeping,” wrote Curtis Dubay, a senior tax policy analyst at Heritage.
Dubay specifically criticized the Child Tax Credit, the Earned Income Tax Credit, the credit for new homeowners and a few others by name, even though these were some of the very deductions that Gregg and Wyden said were among the small group they would not try to eliminate because they are political nonstarters.
Gregg, who appeared at the Bipartisan Policy Center with Wyden, talked repeatedly about the way that his bill would increase business revenues and jobs by lowering the corporate income tax.
“Obviously for [Republicans] it’s anathema to raise taxes,” he said, but added this his plan would “generate a lot of revenues without raising taxes.”
Former Senate Majority Leader Tom Daschle, South Dakota Democrat, moderated the discussion with Wyden and Gregg. He asked them how they would overcome the fact that there are now special interest lobbyists who push hard to create their pet exemption or deduction.
“We’ve built 10,000 constituencies for each of one of these particular incentives,” Daschle said.
Ellis, in an interview, agreed and said this is the biggest challenge for the bill, since there is an “army of well paid lobbyists” behind every loophole while the benefits of reform would benefit a much larger but more diffuse, less organized and less vocal group of Americans.
“It’s the classic problem with tax reform,” said Ellis, who said he does not think the Wyden-Gregg bill will pass this year.
But Wyden argued that Democrats and Republicans could come together to fight against special interests together rather than fighting one another.
Wyden also lamented the byzantine nature of the current tax code, noting the proliferation of promotional giveaways by restaurants in the U.S. that have sprung up around April 15, which is when taxes are due.
“The tax code – navigating those 10,00o provisions has become so painful for Americans that, as far as I can tell, on April 15 people can pretty much eat and drink their way through America for free because so many of our restaurants and establishments are trying to help people assuage the pain,” the Democrat said.
The Wyden-Gregg proposal would reduce the number of tax brackets from six to three: 15 percent for those making $75,000 or less, 25 percent for those making between $75,000 and $140,000, and 35 percent for those making more than $140,000.