The future of tax reform

In early December, I was able to attend a Bloomberg Government panel discussion on tax reform on behalf of NCRA. Robert Litan, Jennifer Blouin, William Gale, and Doug Holtz-Eakin were speakers on the panel, all providing insightful perspectives from their fields.  Tax reform remains one of the most discussed issues on Capitol Hill and understanding the issue is important with potential changes coming in the near future.

When the tax code was created, 100 years ago, it was less than 500 pages. Today the tax code is more than 70,000 pages, creating confusion and providing thousands of specific exemptions. Tax reform remains a key issue for several reasons, mainly that American corporations are unable to stay competitive in today’s market and the increasingly complex code needs to be simplified. The United States has not seen a major overhaul to the tax code since 1986, when President Ronald Reagan was able to work with House Speaker Tip O’Neil and achieve a major legislative victory simplifying the tax code.

Finance Committee Chairman Max Baucus, D-Mont., released a new plan to fix our country’s corporate taxes, especially uncollected offshore income, in an effort to move along tax reform legislation. Baucus suggests a one-time minimum tax on offshore profits to bring revenue back into the country.  He took major heat from Republicans because of the timing of his plan which was introduced when both sides were focused on getting a budget done before the government shutdown that would occur in January, if nothing is passed. With a rough political climate right now and a president with weak political capital after a failed rollout of the Affordable Care Act, Republicans are worried about conceding too much in any potential deal with primaries early next year. Political pundits point to 2015 as the year tax reform would be more likely since the 2014 elections will give both the House Ways and Means Committee and the Senate Finance Committee new chairmen. The president will also be looking for a second term legislative victory to put his name on, something that looks gloomy until after midterm elections.

During the last several years, both parties have agreed that tax reform is a critical issue for the country to address. However, Republicans have been wary of agreeing to more tax increases while Democrats have been insistent that revenues be raised somehow. It seems unlikely that a tax reform bill will pass this year, but many businesses are hopeful that the tax code will be simplified. While economists continue to note that the U.S. is losing money every year because of our tax code, money is not being reinvested back in the U.S. because of the high tax rates.  Each side has their own policy that they believe will be best for the country.

Baucus and the White House are pushing to keep one of our current policies known as the international tax, a tax that is only used by the United States. As an example of our current system: Starbucks, an international company, is taxed in the United States and then must pay taxes on certain gains after it pays a territorial tax (income tax in the country the business is located) in another country. Oftentimes, most companies never pay the tax or hide gains in tax loopholes because companies are not taxed upfront under current tax code. Under the Democrats’ proposal, Baucus would keep the current international tax system while providing a tax holiday and lower overall tax rates for business.

On the Republican side, David Camp, R-Mich., chairman of the House Ways and Means committee, has floated a proposal that would change two major parts of the current tax policy. First, Camp suggests changing the top tax bracket for high income earners and businesses to 25%, which is lower than Baucus’ proposal. This would make the U.S. more competitive on the business front, as the U.S. currently has one of the highest corporate tax rates. The second part of the plan would move the country to a territorial tax system from an international tax system. Most other developed nations run their tax system on a territorial system. A territorial system is believed to help change how companies operate outside the U.S.

Both sides seem willing to allow an exemption of a low tax or no tax if companies bring back the money from overseas by a certain date. This was last used by President George Bush. Under the “Tax Holiday,” Bush allowed companies to use offshore income to reinvest in America under a lower tax rate, bringing back $360 billion. This would be something both sides seem willing to do again in the future to try to get the economy moving again. Scholars have different opinions on the amount of money that would be reinvested this time around but believe it to be a significant amount, as many companies have significant amounts of capital housed in overseas accounts.

Despite these proposals and some positive overtures by both parties, tax reform seems to be unlikely this year. If tax reform happens, 2015 seems to be the most likely opportunity.

Social networking transforms political communication

Prior to the 2008 presidential election, then-presidential hopeful Barack Obama hired Facebook cofounder Chris Hughes to run his social media campaign. By hiring Hughes, Obama changed political communications, and many politicians started using social media as a communication tool with their constituents and potential voters. Facebook, Twitter, and LinkedIn provided the opportunity for Americans to find instant news and information from their legislators, even before it is publicized broadly through traditional media. Social media has become an unprecedented direct avenue of communication between citizens and their elected officials.

Prior to the growth of social media, the majority of political offices would respond to their constituent’s letters, phone calls, and emails with one of the same. The incredibly high volume of correspondence with Congressional offices led to slow response times. Some offices took two or three weeks to respond to constituents. Approximately two years ago, less than half of members of Congress used Twitter.

Congressional staff would send out more traditional mail that would not reach constituents in a timely fashion. Government offices relied largely on newspapers and constituent mail to get their message out to the public. Likewise, constituents had to send letters or emails or drive to see their elected officials to get their voices heard. Since 2011, Americans have been able to use social media as a tool to communicate with government officials, an avenue that has not been offered before.

The 2011 State of the Union marked a turning point in social media’s use by politicians. Elected members of Congress could be seen “tweeting” from the House floor to the more than 100 million members of Twitter. The publicity generated by Congressmen using Twitter during the State of the Union pushed other members of Congress to set up and maintain Twitter accounts in the months that followed, and more than 85 percent of our Senators and Representatives got into social media. That number continues to rise today.

Social media also shaped the 2012 presidential race. Earlier this year, Michele Bachmann began uploading all of her campaign videos onto YouTube to share her experiences and visions she had for the country. Similarly, President Obama set up a live stream through Facebook where he was asked questions by individuals on Facebook. More than 22,000 individuals signed up for this.

The Mitt Romney and Obama campaigns began to place their daily Web ads on YouTube and other highly-trafficked Internet sites, in hopes of reaching more people with their messages specifically in the swing states of Florida, Nevada, Ohio, Wisconsin, and Virginia. Additionally, early in 2012, Governor Romney rolled out his mobile Vice President app, which promised to inform all users of the app who the VP pick would be before the announcement.

Facebook has proven to be a great communication outlet for politicians to get their messages out to a large number of people for minute cost. According to a study by the Congressional Management foundation, more than 60 percent of senior managers and social media managers in Congressional offices say Facebook is a “somewhat or very important tool” for understanding the views and opinions of constituents. In addition, 42 percent say the same for Twitter, and just 34 percent say YouTube is a “somewhat or very important” social media tool.

Social media will be an important tool in the future of political communication for court reporters. The lessons learned from Capitol Hill certainly can be transferred down to the state level when lobbying for issues important to the day-to-day lives and livelihoods like certification, third-party contracting, keeping officials in the courtroom, and any other issue related to the profession.