The Tax Overhaul and Philanthropy

During their first hearing of the 112th Congress, House Ways and Means Committee members gathered on January 20—in a bipartisan spirit—to begin the first of many discussions on the committee’s desire to reform the country’s federal income tax system.

The last major reform of the federal tax system took place 25 years ago with the Tax Reform Act of 1986, a piece of landmark legislation that broadened the tax base and reduced marginal tax rates on individuals and businesses. Since then, marginal rates have risen, the tax base has narrowed, and the tax code has been described by many as substantially complex. In his opening statement, Chairman Dave Camp (R-Mich. 4) described the ’86 tax reform act as having been loaded with “a dizzying array of credits, deductions, exclusions, and exemptions.” He later went on to say the tax code is “too complex, too costly, and takes too much time to comply with.”

It was clear throughout the hearing that both Republicans and Democrats are in accord that there is a need to reform the federal tax code and that this is the time to do it. However, it is the method of “doing it” that appeared to be the 800-pound gorilla in the room. Rep. Devin Nunes (R-Calif. 21), and several others on the committee from both sides of the aisle, stressed the need to move forward with reforming the federal tax code in a bipartisan way.

Throughout the hearing there were several questions raised, including if tax cuts pay for themselves, what can be done to encourage job growth domestically and whether individual and business tax reform should be done separately or together?

By the end of the hearing, it was clear that the process of reforming the federal tax code will be a very long, deliberate, and complicated one. But we will be watching…

Rockhelle Johnson is an advocacy coordinator at the Council on Foundations