The Senate Finance Committee’s five bipartisan tax writing working groups submitted their reports Wednesday to the committee’s leaders on ways to reform the tax code.
The reports provide tax reform recommendations for the Committee to consider as it contemplates comprehensive tax reform in five areas: individual income tax; business income tax; savings & investment; international tax; and community development & infrastructure.
As the committee notes, while each report is a bipartisan product of each group’s co-chairs, unless otherwise stated, the materials presented are not necessarily endorsed, in whole or in part, by each member of each working group.
The tax working group plans incorporate public comments each group received earlier this year.
“Any remake of the U.S. tax code should work to lower the rates and broaden the base. We need to simplify the code and make it easier for families and create a system to keep American job creators competitive around the globe,” said Senate Finance Committee Chairman Orrin Hatch, R-Utah, in a statement. “Now, armed with new ideas, I plan to work with Senator Wyden to review each working group’s report and examine how they can be used to further advance the Committee’s efforts to achieve this bipartisan goal.”
Ranking member Ron Wyden, D-Ore., added in the statement that the committees’ “constructive feedback and ideas are essential as we push ahead toward our shared goal of modernizing the tax code.”
Sens. Chuck Schumer, D-N.Y., and Rob Portman, R-Ohio, co-chairmen of the working group on international tax reform, said they recommended tax reforms that include “transitioning to a hybrid, territorial-like system, patent boxes, base erosion, deemed repatriation, and other major areas.”
The bipartisan agreement, they said, “draws from elements included in prior international reform efforts” put forth by President Barack Obama and former House Ways and Means Committee Chairman Dave Camp.
“Our international tax system is upside down and inside out. It creates incentives to send jobs and stash profits overseas, rather than creating jobs and economic growth here in the United States,” Schumer said in a statement. “These proposals would right the ship, provide a potential funding source for transportation reauthorization, and allow the United States to compete on a level playing field.”
Among the recommendations in the Savings & Investment report include considering ways to allow employers to join open multiple employer plans. MEPs allow businesses to share administrative and other responsibilities associated with providing retirement plans to their employees, but the report notes that current law “hinders the formation of MEPs by requiring a ‘nexus’ between employers who wish to join a MEP.”
The plan also suggests allowing part-time workers to enroll in an employee-sponsored retirement plan.
The working group report also recommends giving employees who take out a loan on their 401(k) a longer period of time to pay it back if they leave their employer.
While not providing an official position on the Savings & Investment tax proposal, Dallas Salisbury, president and CEO of the Employee Benefit Research Institute, told ThinkAdvisor in an email message that missing among the report is ”any quantifications of how much the proposals might increase participation and vesting and readiness, or revenue estimates in terms of the budget cost of the changes, or how those costs would be covered as part of comprehensive tax reform (given the requirement that new incentives be paid for by something being taken away).” The proposal, he said “is ‘one small step’ in a very long [tax reform] process that likely extends beyond the 2016 election.”
Due to that projected length of time, “uncertainty abounds, since the pundits say that the Senate may flip back to the D’s in 2016.”
Cathy Weatherford, president and CEO of the Insured Retirement Institute, noted that while IRI is still reviewing the Savings & Investment tax plan, IRI commends the working group “for establishing the goals of increasing access to tax-deferred retirement savings, increasing participation and levels of savings, and discouraging leakage while promoting lifetime income.”
These goals, she continued, ”recognize the retirement income challenges facing Americans, and the important value tax-deferred retirement savings and lifetime income options have in helping Americans overcome these challenges and attain a financially secure retirement. These objectives are aligned with IRI’s retirement security legislative agenda.”
— Check out Taxpayer Advocate Urges IRS to Ease FATCA Rules for Americans Abroad on ThinkAdvisor.