Is there a constituency for tax simplification?

Is There a Constituency for Tax Simplification?

A Colloquy 

On October 6, 1989, TEI President William M. Burk wrote to Ronald A. Pearlman, Chief of Staff of the Congressional Joint Committee on Taxation, concerning remarks attributed to Mr. Pearlman with respect to congressional efforts to simplify the tax laws. On November 3, 1989, Mr. Pearlman responded to Mr. Burk's letter. The two letters are reprinted below.

TEI Letter

I read with interest news reports of your participation at the New York State Bar's recent meeting in Bermuda. I certainly appreciate the frustrations that may arise as budget demands (once again) push Congress to another hurried, less-than-pristine tax bill. Believe me, those frustrations can be found not only on Congress's (and the staff's) side of the table, but on taxpayers' side as well. I do feel compelled, however, to respond on your comment that there is no "constituency" for tax simplification. In particular, I do not think it is true or fair to state that taxpayers refused to support Chairman Rostenkowski's proposal to simplify the corporate alternative minimum tax proposal.

When H.R. 1761 was introduced in the spring, numerous taxpayers and industry groups testified in favor of the legislation. Moreover, even after the relief portions of the bill were watered down by the Select Revenue Measures Subcommittee (primarily for revenue reasons), that support -- while somewhat tempered -- continued. For example, following the Chairman's introduction of H.R. 3150, TEI wrote all members of the Ways and Means and the Senate Finance Committees, expressing its support for the bill's simplification objective and encouraging Congress to include corporate AMT reform provisions in the 1989 budget bill.

True, taxpayers sought some changes in the bill, but I do not believe it is accurate to say that "only the Chairman cared." Nor do I think that taxpayers' motives should be impugned on the ground that their proposed amendments would cost money. Obviously, budget constraints make other than blunt-instrument simplification more difficult. Obviously, too, "equity" and "simplicity" are frequently at odds with one another. The solution, however, is not a "take it or leave it" approach to simplification efforts. The solution is continuing dialogue and a willingness to compromise. And the compromises should not be all one way. A Hobson's choice, by definition, is no choice at all.

Quite simply, sometimes simplicity is going to cost money. That TEI and other groups are institutionally unable or unwilling to engage in a "robbing Peter to pay Paul" exercise does not mean that our support for simplification is insincere or hollow.

Tax Executives Institute strongly encourages Congress and committee staffs to redouble their simplification efforts, and we pledge our cooperation and support. In this regard, we are exceptionally pleased that Congressman Pickle's penalty reform bill has been included in both the House and Senate budget bills, and are still hopeful that AMT reform will be part of the 1989 legislation. (Penalty reform is a good example of where we have been able to work together -- taxpayers, professional groups, and staffs. There are many provisions in the Pickle bill that we would prefer to see changed, but that has not prevented us from supporting the legislation.)

Ron, 1990 will bring new challenges: in terms of both simplification and, regrettably, the need for more revenue. Although we may not always agree on how particular provisions should be simplified or where concerns of "equity" or "fairness" (or revenue) should override the simplification objective, I remain convinced that we share a commitment to improving the tax system.

I look forward to discussing these issues more fully when TEI holds its liaison meeting with the Joint Committee staff in January.

Joint Committee Response

Thank you for your thoughtful letter of October 6, 1989, relating to my comments regarding tax simplification at the recent New York State Bar meeting. Future efforts of those within government to simplify our tax laws are going to require the support and input of tax professionals. Thus, I am pleased that you have reaffirmed TEI's interest in tax simplification.

By stating that "taxpayers' motives ... [might] be impugned on the ground that their proposed amendments would cost money," I am concerned that some may read your letter as implying that Members of Congress and the congressional tax staffs will not propose or consider simplification proposals that result in revenue losses. Such an implication would be both inaccurate and unfortunate. As is evidenced by Chairman Rostenkowski's introduction of H.R. 1761, relating to the simplification of the corporate alternative minimum tax, and final House action in connection with the AMT, it is clear Members recognize that some simplification initiatives may lose revenue and, indeed, are prepared to support such initiatives within current budget constraints. While we must be mindful of the budgetary implications of simplification efforts, let me assure you that members of the Joint Committee staff are quite prepared to make simplification recommendations to the tax-writing committees even if those recommendations are estimated to lose revenue.

As we continue to explore simplification options at the staff level, we look forward to your input. In that regard, I think it is important for all of us, whether in the private sector or in government, to be especially careful to limit simplification recommendations to those truly designed to simplify the tax laws and not permit "simplification" to become the guise for tax policy changes. I recognize that policy and complexity frequently are related. However, there is ample opportunity in the tax legislative process to debate policy issues without risking the fate of future simplification efforts by unduly encumbering those efforts.

Thank you again for taking the time to write.