The likelihood of seeing tax reform in the US while Barack Obama is still president has seen a boost as one of the Senate’s top tax law writers has said he intends to pursue the changes.
While having the support of top tax writers can only work in the favour of tax reform, many see the move as meaningful but unlikely to yield any real results.
According to a report by Reuters: “Though there are disagreements on the details, there is bipartisan support for tax reform in Congress,” said Orrin Hatch, Republican chairman of the Senate Finance Committee, at a conference for tax lawyers, analysts and economists.
He added: “Members of both parties have expressed their support for a tax overhaul. And, I believe there is real momentum to get something done on tax reform this year, if we remain committed. And, believe me, I’m committed.”
This is a new role for Hatch who only took the control of the committee this month when the Republicans took control of the Senate.
Since taking up the position Hatch has split the panel into five different working groups and from these groups he hopes to have recommendations for the future “later this spring”.
According to a report by Reuters, the groups will be examining key issues such as tax, business income tax, savings and investment, international tax and community development and infrastructure.
It has been nearly three decades since there has been a major overhaul in the tax codes in America and because of the length of time since major reforms have been put in place a series of gaping loopholes have opened up in the system with this in turn leading to a growing problem of tax avoidance in the country.
According to Reuters, the loopholes, together with deep tax cuts some years ago, means the government does not raise enough revenue to pay its bills, while at the same time, tax experts also generally agree that the system is so complex and often contradictory that compliance costs are excessive and economic productivity is harmed.
Tax is a notoriously difficult subject for politicians to be able to tackle being as in reality, there is nobody who really wants to pay them while everyone wants to gain from tax revenue.
Hatch has laid out basic principles for reform, say Reuters. At the conference, he said he has the impression that Democratic President Barack Obama might be willing to do a deal on business tax reform alone, setting aside individual income tax issues.
“We need to lower corporate tax rates and transition toward a territorial tax system,” Hatch said. A territorial system is one that would exempt all or most of the foreign profits of U.S. corporations from the corporate income tax.