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Simpson and Bowles Release Statement on Baucus-Hatch Tax Reform Letter

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The Moment of Truth Project Co-Chairs weigh in on Senate tax reform proposal

Today, Senate Finance Committee Chairman Max Baucus and Ranking Member Orrin Hatch released a letter to their colleagues outlining their proposed approach to developing a tax reform bill over the coming months.  The letter lays out a process whereby all tax expenditures will be eliminated from the tax code, with worthwhile provisions added back on a case-by-case basis.  This is a similar approach to the Zero Plan included in the Fiscal Commission's final report, The Moment of Truth.  Erskine Bowles and Alan Simpson also proposed the Zero Plan in their deficit reduction framework, A Bipartisan Plan Forward.  This plan would set aside $585 billion of savings from elimination of tax expenditures over ten years for deficit reduction, with the rest of savings used for reducing individual and corporate tax rates, restoring tax breaks policymakers consider worthwhile in a more cost-effective and progressive manner and moving to an competitive international tax system. This afternoon, Bowles and Simpson released the following statement on the Baucus-Hatch letter: 

“We are pleased and excited to see Senators Baucus and Hatch adopt the Fiscal Commission’s Zero Plan approach to tax reform, which represents a major step forward and may be the last best chance for reforming our inefficient, confusing, and outdated tax code. It's time for advocates of these tax preferences – called ‘tax expenditures’ – to bear the burden of justifying their existence, rather than making it so difficult for those who want to scrub the code of such preferences.

“The introduction of the Zero Plan in the Fiscal Commission was a key part of our success in overcoming the impasse on tax reform and reaching a bipartisan consensus on a comprehensive plan. Eliminating all tax preferences allowed us to reduce the top two rates to 23% while setting aside a small portion of the savings for deficit reduction. Starting with a clean slate and requiring those who wish to add back tax preferences to pay for them with rate increases, would lead politicians to subject tax expenditures to much greater scrutiny and, if desired, then to restore worthwhile tax expenditures in a more efficient and cost-effective manner. The Commission’s slogan was ‘If you want it pay for it!’

“Starting with the Zero Plan doesn’t absolve policymakers of the hard choices, but it surely does change the presumption by turning the tables on defenders of the status quo and forcing them to make the case for their particular tax preference.

“The decision by Senators Baucus and Hatch to use this approach makes us hopeful that Washington can enact tax reform to attain lower rates, level the playing field, improve simplicity, promote robust economic growth, and reduce the deficit. It’s incredibly encouraging to see these two Senators ready to work together and to roll up their sleeves and take on the powerful special interests.

“We commend Chairman Baucus and Ranking Member Hatch for taking such a bold approach and providing valuable leadership in forcing a real discussion on tradeoffs that will advance the cause of serious tax reform and possibly broader fiscal reform.

“We sincerely hope that their fellow Senators will rise to the challenge and act responsibly in using the savings from eliminating the $1.3 trillion in annual ‘tax expenditures’ to lower rates in a progressive manner, reduce the deficit, and restore those tax provisions they consider worthwhile in a more efficient, cost-effective manner. We stand prepared to work with them in any way we can help to achieve these vital and important national goals."