[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.