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Joint Statement by Alan Simpson, Erskine Bowles, Alice Rivlin and Pete Domenici

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October 12, 2012

Joint Statement by Alan Simpson, Erskine Bowles, Alice Rivlin and Pete Domenici

 

Washington, D.C. - The following is a joint statement by Alice Rivlin and former Senator Pete Domenici, co-chairs of the Bipartisan Policy Center's Debt Reduction Task Force, and Alan Simpson and Erskine Bowles about a new study from the Joint Committee on Taxation:

"In order to reach a bold bipartisan budget deal, both the Simpson-Bowles Fiscal Commission and the Bipartisan Policy Center's Domenici-Rivlin Debt Reduction Task Force agreed on the importance of generating new revenue from fundamental tax reform. Indeed, there is a growing bipartisan consensus for an approach that broadens the base, lowers rates and raises revenue as part of a comprehensive fiscal plan.

"We currently spend more than $1.1 trillion a year on tax expenditures - deductions, credits and other preferences, which are expensive, regressive, economically distorting and, for the most part, simply hidden spending in the tax code. While the details of our proposals differed, we both recommended reforming or repealing many of these tax expenditures in order to dramatically reduce both tax rates and deficits, all in a way that is progressive and conducive to economic growth. The non-partisan Tax Policy Center estimated that both of these plans would achieve significant deficit reduction, and do so in a progressive manner.

"A new study by the Joint Committee on Taxation (JCT) assumes a less drastic reduction in tax expenditures and a different baseline that allocates more savings to deficit reduction, and therefore is able to achieve much less rate reduction. The fact that rates cannot be lowered as much if large tax expenditures are left unaddressed and if most of the savings from those that are eliminated are put towards deficit reduction illustrates a tradeoff, but does not surprise anyone who has worked with tax estimation.

"The JCT study looks at only a subset of the tax expenditures we reformed or eliminated, thereby leaving out a substantial amount of savings that were included in our proposals. Most notably, the JCT study does not address the employer health exclusion, the largest tax expenditure in the code, as our plans would. In addition, the JCT study assumes tax reform is revenue neutral relative to a "current law" baseline - a baseline that includes the expiration of all parts of the 2001, 2003 and 2010 tax cuts, a position neither party is advocating. This assumption effectively required the JCT to find $4.5 trillion of deficit reduction through base broadening - far more than is included in our plans or any other plan - and use only roughly $700 billion for rate reduction.

"JCT looked at one possible model for tax reform - although we do not disagree with their analysis, it does not reflect the model embodied by our plans. Nothing in the JCT analysis changes our belief that it is possible for tax reform to reduce rates and produce additional revenues if policymakers are willing to make the tough choices to eliminate or scale back tax expenditures. There is no question that reforming the tax code will require making hard and careful choices. Policymakers should work diligently on a bipartisan basis to identify the appropriate reforms to force our debt under control and get our economy growing."


For media inquires, please contact Jon Romano at romano.jon@gmail.com.    

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The Moment of Truth project is a non-profit, non-partisan effort which seeks to foster honest discussion about the nation's fiscal challenges, the difficult choices that must be made to solve them, and the potential for bipartisan compromise that can move the debate forward and set our country on a sustainable path. The Moment of Truth project is a project of the Committee for a Responsible Federal Budget.

 

 

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Oct 12, 2012
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Indeed, there is a growing bipartisan consensus for an approach that broadens the base, lowers rates and raises revenue as part of a comprehensive fiscal plan.