On July 18, 2017, the United States Senate Committee on Finance (the "Committee") considered the nomination of David J. Kautter as U.S. Treasury Department Assistant Secretary for Tax Policy.

At the Committee hearing, Mr. Kautter argued for simplifying the tax code:

"The current code is unnecessarily complex, anti-competitive and picks winners and losers. Americans need a simpler system when filing their taxes and the middle class needs a tax cut. U.S. businesses need a tax code that allows them to prosper, domestically and in the international marketplace."

In a written statement, Committee Ranking Member Senator Ron Wyden (D-OR) emphasized the need for bipartisanship. He argued that a successful tax reform plan cannot focus on "slashing rates for the wealthy and the biggest corporations."

Hearing participants touched on numerous issues that likely will be debated as part of the tax code revision process. Those issues included:

  • revenue neutrality;
  • bipartisanship;
  • temporary versus permanent tax cuts;
  • the elimination of deductions;
  • the expensing of capital expenditures;
  • territoriality;
  • corporate versus pass-through relative rate reduction;
  • income tax progressivity; and
  • the efficacy of debt-financed tax cuts.

Commentary / Mark Howe

The confirmation hearing of David Kautter to be Assistant Secretary of the Treasury for Tax Policy is important but not telling as to where Trump-sponsored tax reform is headed. In a somewhat amusing and potentially revealing exchange regarding an explicit pledge that the middle class will be the focus of tax reform, Senator Wyden said he would not invoke a "Kautter Rule" (referencing Treasury Secretary Mnuchin's comment on the relative tax cuts between high-income and middle-income earners). However, an initial Tax Policy Center analysis of the amounts of an absolute tax cut and the electoral map (from time.com) underscore a basic tension in the Republican tax reform plan. Regarding this study, approximately 7 billion dollars of tax cuts will go to 27 million middle-income households, while approximately $287 billion of tax cuts will go to the top 1% of taxpayers (approximately 1.35 million households). How the administration's aspiration that the middle class be the focus of tax reform will be achieved given these numbers is a narrative to be played out.

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