Conrad makes a case against tax subsidies

Senate Budget Committee Chairman Kent Conrad is an important player in tax reform.

Interesting to see Senate Budget Committee Chairman Kent Conrad (D-ND) working hard to build a case for trimming the $1 trillion in tax breaks that infect the revenue code. Yesterday, as part of that effort, he brought in a broad range of tax experts to testify before his panel. They agreed that many of these preferences (aka tax expenditures) must go—although they were hardly on the same page when it came to which ones or what to do with the money.

In the normal course of events, the budget committee has little to say about tax preferences, although as a member of the Finance Committee, which does have jurisdiction, Conrad is not without influence. And he seems much more enthusiastic about tackling the politically thorny deductions, credits, and exclusions than Finance panel chairman Max Baucus (D-MT). Besides, Conrad may figure that a framework for tax reform will be written in high-level talks between the White House and Congress—a process he’d clearly like to influence.

At his hearing, Conrad wanted to make four points—none new, but all worth repeating. The first is that many of these tax breaks are the functional equivalent of spending and should be treated as such. The second is that tax breaks can be a very inefficient way to deliver government subsidies. The third is that the biggest beneficiaries are often the wealthy rather than the middle class. The last is that eliminating or at least shrinking these benefits should be “at the heart” of any tax reform, with the revenues used to cut both rates and the deficit.

Conrad is a member in good standing of the so-called Gang of Six—a bipartisan group of senators struggling to find a consensus on deficit reduction. As a member of President Obama’s fiscal commission, he supported the controversial recommendations of panel chairs Erskine Bowles and Alan Simpson. And he is a lame-duck, having announced his retirement at the end of this Congress.

The former North Dakota tax commissioner is nothing if not persistent. For years, he and his ubiquitous charts and graphs have been a fixture on the Senate floor, as he warns about the dangers of the deficit. Conrad’s voice on the need to include revenue increases—in the form of cuts in tax preferences—is an important one.

As I noted a couple of weeks ago, three GOP senators—Saxby Chambliss of Georgia, Mike Crapo of Idaho, and Tom Coburn of Oklahoma (the three GOP members of the Gang of Six) have also been arguing for cuts in tax preferences. They have been much more circumspect about whether they’d be willing to use any revenues for deficit reduction but, in their way, they too are moving the debate forward.

In the currency of Capitol Hill, hearings are cheap. Votes matter more, and Conrad—who supports many farm subsidies and voted to extend all the Bush-era tax cuts last December—can be a situational fiscal reformer (not unlike other deficit hawks). But the record he’s building matters in the halting journey towards both a sensible tax code.

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