[House Report 112-629]
[From the U.S. Government Publishing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     112-629

======================================================================



 
 PATHWAY TO JOB CREATION THROUGH A SIMPLER, FAIRER TAX CODE ACT OF 2012

                                _______
                                

   July 30, 2012.-- Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

    Mr. Dreier, from the Committee on Rules, submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 6169]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Rules, to whom was referred the bill (H.R. 
6169) to provide for expedited consideration of a bill 
providing for comprehensive tax reform, having considered the 
same, report favorably thereon without amendment and recommend 
that the bill do pass.

                           table of contents

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Committee Consideration..........................................     3
Committee Votes..................................................     3
Committee Oversight Findings and Recommendations.................     5
Congressional Budget Office Cost Estimate........................     5
Performance Goals and Objectives.................................     6
New Budget Authority, Entitlement Authority, and Tax Expenditures     6
Committee Cost Estimate..........................................     7
Federal Mandates Statement.......................................     7
Advisory Committee Statement.....................................     7
Applicability to the Legislative Branch..........................     7
Statement Regarding Earmarks.....................................     7
Section-by-Section Analysis of the Legislation...................     7
Changes in House Rules Made by the Legislation as Reported.......     9
Changes in Existing Law Made by the Legislation as Reported......     9
Dissenting Views.................................................    10

                          purpose and summary

    H.R. 6169, the Pathway to Job Creation through a Simpler, 
Fairer Tax Code Act of 2012, creates a pathway that puts 
comprehensive tax reform within reach. This bill provides for 
expedited consideration in 2013 of a measure that provides for 
comprehensive tax reform.

                  background and need for legislation

    The U.S. tax code is no longer working for the American 
people or small businesses. Since 2001, there have been nearly 
4,500 changes made to the tax code, averaging more than one 
each day over the past decade. The tax code's complexity causes 
nearly nine out of ten families to either hire tax preparers 
(60 percent) or purchase software (29 percent) to file their 
taxes, while 71 percent of unincorporated businesses are forced 
to pay someone else to prepare their taxes. Complying with the 
tax code under these circumstances forces individuals, 
families, and employers to spend over 6 billion hours and over 
$160 billion per year in an effort to faithfully comply with 
the burdensome and complicated Federal tax system. These wasted 
resources are a drain on economic growth and job creation.
    The current U.S. tax code is unfair. It contains hundreds 
of provisions that only benefit certain special interests, 
resulting in a system of winners and losers. Due to this 
imbalance, the tax code violates the fundamental principle of 
equal justice by subjecting families in similar circumstances 
to significantly different tax bills. Furthermore, many tax 
preferences, sometimes referred to as ``tax expenditures,'' 
have the same impact as government spending--rather than 
allowing markets to direct economic resources to their most 
efficient uses, the government redirects resources 
inefficiently and inequitably. The exclusions, deductions, 
credits, and special rules that make up such tax expenditures 
amount to over $1 trillion per year, nearly matching the total 
amount of annual revenue that is generated from the income tax 
itself. In some cases, tax subsidies can literally take the 
form of spending through the tax code, redistributing taxes 
paid by some Americans to individuals and businesses that do 
not pay any income tax at all.
    Finally, the current system and the failure of Congress to 
adopt a permanent tax code with stable statutory tax policy 
have created greater economic uncertainty. Tax rates have been 
scheduled to increase sharply in three of the last five years, 
requiring the enactment of repeated, temporary extensions. 
Additionally, approximately 70 other, more targeted tax 
provisions expired in 2011 or are currently scheduled to expire 
by the end of 2012. Working families and small business owners 
are not able to plan for the future or make rational business 
decisions, including hiring decisions, in this environment of 
uncertainty.
    All of these challenges argue forcefully for comprehensive 
reform. To date, however, obstructionism, dilatory tactics, and 
the complexities of the legislative process have prevented the 
reform process from moving forward. Steps must be taken to 
streamline the process and to ensure that Congress can deliver 
on comprehensive tax reform.

                                hearings

    The Committee on Rules did not hold hearings on this 
measure.
    The Committee on Ways and Means held the following 11 tax 
reform hearings in full committee: Hearing on Tax Reform and 
the U.S. Manufacturing Sector on July 19, 2012; Hearing on Tax 
Reform and Tax-Favored Retirement Accounts on April 17, 2012; 
Hearing on the Treatment of Closely-Held Businesses in the 
Context of Tax Reform on March 7, 2012; Hearing on the 
Interaction of Tax and Financial Accounting on Tax Reform on 
February 8, 2012; Hearing on Economic Models Available to the 
Joint Committee on Taxation for Analyzing Tax Reform Proposals 
on September 21, 2011; Hearing on Tax Reform and Consumption-
Based Tax Systems on July 26, 2011; Hearing on How Business Tax 
Reform Can Encourage Job Creation on June 2, 2011; Hearing on 
How Other Countries Have Used Tax Reform to Help Their 
Companies Compete in the Global Market and Create Jobs on May 
24, 2011; Hearing on the Need for Comprehensive Tax Reform to 
Help American Companies Compete in the Global Market and Create 
Jobs for American Workers on May 12, 2011; Hearing on How the 
Tax Code's Burdens on Individuals and Families Demonstrate the 
Need for Comprehensive Tax Reform on April 13, 2011; and 
Hearing on Fundamental Tax Reform on January 20, 2011.
    The Subcommittee on Select Revenue Measures held the 
following six subcommittee hearings on the subject of tax 
reform: Hearing on Framework for Evaluating Certain Expiring 
Tax Provisions on June 8, 2012; Hearing on Certain Expiring Tax 
Provisions on April 26, 2012; Hearing on Ways and Means 
International Tax Reform Discussion Draft on November 17, 2011; 
Hearing on Energy Tax Policy and Tax Reform on September 22, 
2011 (Joint hearing with the Oversight Subcommittee); Hearing 
on Tax Reform and Foreign Investment in the United States on 
June 23, 2011; and Hearing on Small Businesses and Tax Reform 
on March 3, 2011.
    The Committee on Ways and Means also held the following two 
joint hearings with the Senate Finance Committee: Hearing on 
Tax Treatment of Financial Products on December 6, 2011; and 
Hearing on Tax Reform and the Tax Treatment of Debt and Equity 
on July 13, 2011.

                        committee consideration

    The Committee on Rules met on July 26, 2012 in open session 
and ordered H.R. 6169 reported to the House with a favorable 
recommendation by a record vote of 6 yeas and 2 nays, a quorum 
being present.

                            committee votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Mr. Sessions to report the bill to the House with a 
favorable recommendation was agreed to by a record vote of 6 
yeas and 2 nays, a quorum being present.
    The names of Members voting for and against follow:

                                       Rules Committee Record Vote No. 344
Motion by Mr. Sessions to order the bill H.R. 6169 reported to the House with a favorable recommendation. Agreed
                                             to: 6 yeas and 2 nays.
----------------------------------------------------------------------------------------------------------------
                Majority Members                     Vote                Minority Members               Vote
----------------------------------------------------------------------------------------------------------------
Mr. Sessions...................................          Yea   Ms. Slaughter......................          Nay
Ms. Foxx.......................................  ............  Mr. McGovern.......................          Nay
Mr. Bishop (UT)................................  ............  Mr. Hastings (FL)..................  ............
Mr. Woodall....................................          Yea   Mr. Polis..........................  ............
Mr. Nugent.....................................          Yea
Mr. Scott (SC).................................          Yea
Mr. Webster....................................          Yea
Mr. Dreier, Chairman...........................          Yea
----------------------------------------------------------------------------------------------------------------

    The Committee also disposed of the following amendments by 
record vote:

                                       Rules Committee Record Vote No. 340
   Amendment #1 by Mr. McGovern to H.R. 6169, which would require that expedited procedures only apply to tax
                                    reform. Not agreed to: 2 yeas and 6 nays.
----------------------------------------------------------------------------------------------------------------
                Majority Members                     Vote                Minority Members               Vote
----------------------------------------------------------------------------------------------------------------
Mr. Sessions...................................          Nay   Ms. Slaughter......................          Yea
Ms. Foxx.......................................  ............  Mr. McGovern.......................          Yea
Mr. Bishop (UT)................................  ............  Mr. Hastings (FL)..................  ............
Mr. Woodall....................................          Nay   Mr. Polis..........................  ............
Mr. Nugent.....................................          Nay
Mr. Scott (SC).................................          Nay
Mr. Webster....................................          Nay
Mr. Dreier, Chairman...........................          Nay
----------------------------------------------------------------------------------------------------------------


                                       Rules Committee Record Vote No. 341
   Amendment #2 by Mr. McGovern to H.R. 6169, which would prohibit the sponsor of the tax reform bill and the
 individual making the notification under subsection (b) from being the same person. Not agreed to: 2 yeas and 6
                                                      nays.
----------------------------------------------------------------------------------------------------------------
                Majority Members                     Vote                Minority Members               Vote
----------------------------------------------------------------------------------------------------------------
Mr. Sessions...................................          Nay   Ms. Slaughter......................          Yea
Ms. Foxx.......................................  ............  Mr. McGovern.......................          Yea
Mr. Bishop (UT)................................  ............  Mr. Hastings (FL)..................  ............
Mr. Woodall....................................          Nay   Mr. Polis..........................  ............
Mr. Nugent.....................................          Nay
Mr. Scott (SC).................................          Nay
Mr. Webster....................................          Nay
Mr. Dreier, Chairman...........................          Nay
----------------------------------------------------------------------------------------------------------------


                                       Rules Committee Record Vote No. 342
   Amendment #3 by Mr. McGovern to H.R. 6169, which would strike section 3. Not agreed to: 2 yeas and 6 nays.
----------------------------------------------------------------------------------------------------------------
                Majority Members                     Vote                Minority Members               Vote
----------------------------------------------------------------------------------------------------------------
Mr. Sessions...................................          Nay   Ms. Slaughter......................          Yea
Ms. Foxx.......................................  ............  Mr. McGovern.......................          Yea
Mr. Bishop (UT)................................  ............  Mr. Hastings (FL)..................  ............
Mr. Woodall....................................          Nay   Mr. Polis..........................  ............
Mr. Nugent.....................................          Nay
Mr. Scott (SC).................................          Nay
Mr. Webster....................................          Nay
Mr. Dreier, Chairman...........................          Nay
----------------------------------------------------------------------------------------------------------------


                                       Rules Committee Record Vote No. 343
    Amendment #4 by Ms. Slaughter to H.R. 6169, which would strike all after section 1 and insert a Sense of
                 Congress Regarding Comprehensive Tax Reform. Not agreed to: 2 yeas and 6 nays.
----------------------------------------------------------------------------------------------------------------
                Majority Members                     Vote                Minority Members               Vote
----------------------------------------------------------------------------------------------------------------
Mr. Sessions...................................          Nay   Ms. Slaughter......................          Yea
Ms. Foxx.......................................  ............  Mr. McGovern.......................          Yea
Mr. Bishop (UT)................................  ............  Mr. Hastings (FL)..................  ............
Mr. Woodall....................................          Nay   Mr. Polis..........................  ............
Mr. Nugent.....................................          Nay
Mr. Scott (SC).................................          Nay
Mr. Webster....................................          Nay
Mr. Dreier, Chairman...........................          Nay
----------------------------------------------------------------------------------------------------------------

            committee oversight findings and recommendations

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee made findings and 
recommendations that are reflected in this report.

              estimate of the congressional budget office

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:
                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 26, 2012.
Hon. David Dreier,
Chairman, Committee on Rules,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 6169, the Pathway 
to Job Creation through a Simpler, Fairer Tax Code Act of 2012.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

H.R. 6169--Pathway to Job Creation through a Simpler, Fairer Tax Code 
        Act of 2012

    H.R. 6169 would specify expedited procedures for 
Congressional consideration of certain tax-related legislation 
in the 113th Congress. To be eligible for such expedited 
procedures, tax legislation must be introduced by the House 
Committee on Ways and Means by April 30, 2013, and make 
specific changes to tax laws as detailed by H.R. 6169. In 
particular, the legislation must consolidate the current six 
income tax brackets for individuals, reduce the corporate tax 
rate to no more than 25 percent, repeal the Alternative Minimum 
Tax, broaden the tax base to maintain current revenue levels, 
and make certain other changes.
    CBO estimates that enacting H.R. 6169 by itself would have 
no significant impact on the federal budget. Enacting H.R. 6169 
would not directly affect revenues or direct spending; 
therefore, pay-as-you-go procedures do not apply. Any changes 
to tax laws considered under the procedures specified by H.R. 
6169 would depend on future Congressional actions.
    H.R. 6169 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Matthew 
Pickford. This estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.

                    performance goals and objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The legislation will ensure that Congress has procedures in 
place to provide for expedited consideration of a measure 
providing for comprehensive tax reform.

   new budget authority, entitlement authority, and tax expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        committee cost estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                       federal mandates statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      advisory committee statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                applicability to the legislative branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                   constitutional authority statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
constitutional authority of Congress to enact this legislation 
is provided by Article I, section 5, clause 2 (relating to the 
right of each House of Congress to determine the rules of its 
proceedings).

                      statement regarding earmarks

    In compliance with clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee finds that H.R. 6169 
does not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits as defined in clause 9 of 
rule XXI.

             section-by-section analysis of the legislation


Section 1. Short Title.

    This section provides the short title of the bill, the 
``Pathway to Job Creation through a Simpler, Fairer Tax Code 
Act of 2012''.

Section 2. Findings and Purposes.

    Section 2 describes certain findings related to the current 
state of the Internal Revenue Code of 1986 and establishes the 
purposes of the legislation.

Section 3. Expedited Consideration of a Measure Providing for 
        Comprehensive Tax Reform.

    Section 3 establishes expedited procedures for 
consideration of a measure providing for comprehensive tax 
reform.
     This section defines a ``tax reform bill'' as a bill 
introduced by the the chair of the Committee on Ways and Means 
before April 30, 2013 and entitled ``A bill to provide for 
comprehensive tax reform.'' Further, in order to qualify as a 
tax reform bill, the measure must be the subject of a 
certification to the House and Senate from the chair of the 
Joint Committee on Taxation that the bill as introduced 
contains the following proposals: (1) consolidation of the 
current individual income tax brackets into no more than two 
brackets of 10 and not greater than 25 percent; (2) reduction 
in the corporate tax rate to not greater than 25 percent; (3) 
repeal of the Alternative Minimum Tax (AMT); (4) broadening of 
the tax base to maintain revenue between 18 and 19 percent of 
the economy; and (5) change from a ``worldwide'' to a 
``territorial'' system of taxation. The certification by the 
chair of the Joint Committee on Taxation is only applicable to 
the bill as introduced. The Committee intends that the 
certification is not required at any other stage in the 
legislative process for a bill to be eligible for the expedited 
procedures contained in the bill.
    Subsection (c) establishes procedures for the expedited 
consideration of the tax reform bill in the House of 
Representatives, which include the following:
     Any committee that receives a referral on the tax 
reform bill must report the legislation to the House within 20 
calendar days. Failure to report the legislation within that 
time period will result in an automatic discharge.
     If the Rules Committee has not provided a special 
order for consideration of the tax reform bill within 15 
legislative days after the bill has been reported or 
discharged, the majority leader (or after two additional 
legislative days any Member), may offer a motion to proceed to 
the tax reform bill.
     If the motion to proceed is agreed to, debate on 
the bill is limited to four hours equally divided and 
controlled by the chair and ranking minority member of the 
Committee on Ways and Means. The bill is subject to amendment 
under the five-minute rule and one motion to recommit the bill 
is in order.
    Subsection (d) establishes procedures for the expedited 
consideration of the tax reform bill in the Senate, which 
include the following:
     The bill must be referred to the Committee on 
Finance, which must report the bill within 15 calendar days 
after receipt of the bill in the Senate. Failure to report the 
legislation within that time period will result in an automatic 
discharge.
     After the Finance Committee reports the tax reform 
bill or the bill is discharged, the majority leader (or after 
two additional session days any Member) may offer a motion to 
proceed to the bill. The motion is not debatable--cloture is 
not required before a vote on the motion to proceed.
     Debate on amendments is limited to two hours on 
each amendment--cloture is not required before votes on 
individual amendments. Amendments must be relevant to the tax 
reform bill.
     There is no limit on the total time available for 
debate on the tax reform bill--cloture on the underlying bill 
may still be required prior to a vote on passage.
    This section also contains procedures to facilitate and 
expedite going to conference on the tax reform bill and 
appointment of conferees. In the House, the chair of the 
Committee on Ways and Means may offer any motion specified in 
clause 1 of rule XXII. In the Senate, the chair must lay the 
message from the House before the Senate, the motion to go to 
conference and the motion to authorize the chair to appoint 
conferees are to be agreed to, and the chair is authorized to 
appoint conferees with a ratio agreed to with the concurrence 
of both leaders.
    Finally, the bill also reaffirms that these provisions are 
enacted by the Congress as an exercise of the rulemaking power 
of the House of Representatives and Senate.

          changes in house rules made by the bill, as reported

    Clause 3(g) of rule XIII of the Rules of the House of 
Representatives requires the Committee on Rules to provide a 
comparative print showing proposed changes to the standing 
rules of the House. The Committee finds that H.R. 6169 does not 
propose to repeal or amend a standing rule of the House.

         changes in existing law made by the bill, as reported

    Clause 3(e) of rule XIII of the Rules of the House of 
Representatives requires that when a committee reports a bill 
or joint resolution proposing changes to existing law, it 
include a comparative print showing the proposed changes. The 
Committee finds that H.R. 6169 does not propose to change 
existing law.

                            DISSENTING VIEWS

    While we agree that comprehensive tax reform is urgently 
needed, we fundamentally disagree with the majority's 
principles for reform, as specified in H.R. 6169.
    We want to combine tax reform with smart, targeted spending 
reductions to provide the long-term means to reduce the 
national debt significantly, and make investments in national 
priorities such as infrastructure, education, research, and 
defense, that are critical to future American competitiveness 
and job growth.
    We propose a rate structure that distributes the tax burden 
in a more progressive manner.
    We support having a tax code that discourages tax 
avoidance, including the use of entities and accounts in tax 
haven jurisdictions, such as Swiss bank accounts or assets 
hidden in Bermuda or the Cayman Islands.
    We want to preserve and improve the provisions of the tax 
code that support middle class homeownership, education, 
retirement savings, and healthcare.
    We want to retain and improve refundable tax credits that 
encourage work and education while lifting millions of 
Americans out of poverty.
    We propose to eliminate tax breaks for businesses that move 
jobs and profits overseas in combination with a reduction in 
tax rates for American manufacturers, which are vital to 
innovation and job growth.
    And we want to preserve and improve incentives for small 
business investment and growth.
    These are the principles that we believe should guide any 
effort at comprehensive tax reform. We offered an amendment to 
insert these principles into the bill, and it was rejected.
    Putting aside our disagreement with the majority over what 
principles should guide reform, we believe it is important that 
reform proceed expeditiously, on a bipartisan basis, following 
regular order to ensure that changes to the code are properly 
vetted and that all Americans are represented in the process of 
writing the new code.
    We do not need special expedited procedures to tell us to 
do our job. But if we did choose to establish some sort of 
``fast track'' for tax reform, H.R. 6169 would certainly not be 
the way to go about it. We offered an amendment to strip out 
the flawed expedited procedures in the bill, and it was 
rejected.
    The first serious flaw in these expedited procedures is 
that the same Member of the House who authors the tax reform 
bill contemplated by H.R. 6169 is also the sole judge of 
whether that bill meets the criteria for expedited 
consideration. The same Member cannot play the roles of both 
author and umpire of tax reform. We offered an amendment in 
markup to address this obvious flaw, and it was rejected.
    The second and perhaps more serious flaw in these expedited 
procedures is that they would allow a future tax reform bill to 
be used as a Trojan Horse for the House majority's policy 
agenda--with absolutely no limits on what non-tax provisions 
could be included in a bill that receives ``fast track'' 
consideration in both the House and Senate.
    Although the ``fast-tracked'' bill must begin as a tax 
reform bill, there is no prohibition on either attaching non-
tax pet projects to the bill at later stages in the legislative 
process, or removing the tax reform provisions present at 
introduction. House Republicans could, for example, fast track 
a bill that turns Medicare into a voucher system, or takes away 
reproductive rights, or repeals the Affordable Care Act. This 
procedure allows the House majority to dictate what issues the 
Senate must consider. We offered an amendment to close this 
massive loophole, to limit the fast track procedures to tax 
reform and only tax reform, and it was rejected.
    Rather than starting as the majority has, with a press 
release dressed up as a bill, we strongly believe that the way 
forward on comprehensive tax reform is to follow the example of 
the Tax Reform Act of 1986, when a Democratic House, a 
Republican Senate, and the Reagan Administration successfully 
negotiated a bipartisan overhaul of the Internal Revenue Code. 
They came together in good faith, they followed regular order, 
and they succeeded.
    Because the hard-nosed partisanship of H.R. 6169 cannot 
possibly form the foundation for a successful bipartisan tax 
reform effort, we must dissent.
                                   Louise Slaughter.
                                   James McGovern.
                                   Alcee L. Hastings.
                                   Jared Polis.

                                  
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