New Focus on Tax Reform in the Senate

The discussion of tax reform was rejuvenated this week following an announcement from retiring Senate Finance Committee Chairman Max Baucus (D-Mont.) that he will use the time not spent campaigning for re-election to instead focus on an overhaul of the nation’s tax code. While he did not release additional details on his proposed framework for tax reform, he recently wrote a joint op-ed with Rep. Camp, in which they stated that their agreement on tax reform includes three principles, one of which is to “ensure that low-income and middle-income Americans will pay no more taxes than they do under current law.” Whether they can stick to this assurance and still comply with their other principles, which require lowering taxes for businesses, is not clear.

A look back into the chairman’s prior voting history also provides some insight as to how such an overhaul might affect working family tax credits.

Baucus has generally been a strong advocate for tax relief for low-income families, noting once in a public statement the strong correlation between a child’s future income and their parents’ income, and how reforming our tax code to improve economic opportunity and help those in need “can strengthen the American Dream.” In 2010, he introduced legislation titled “The Middle Class Tax Cut Act of 2010” that would have made permanent earlier improvements to the Child Tax Credit, Earned Income Tax Credit, and Dependent Care Credit. The bill was successful in the Senate, but never made it through the House.

This year Baucus voted against the budget plan from Senate Democrats, which included a similar attempt to make permanent improvements to working family tax credits.  However, he appears to have done so because he opposed the level of new revenues it included and because he opposed the “fast track” reconciliation instructions, not because he disagreed with its provisions on tax credits for working families.

His tax reform proposal also has significant implications for working families’ access to other programs. Chairman Baucus has indicated that he is looking for a compromise between the House and Senate budgets on new revenues when he develops a tax reform bill, but it will be difficult to find a balance between the two that allows enough spending to protect all benefits for low-income working families.