House Republicans take aim at IRS, tax reform

House Republicans this week are embracing an agenda that’s sure to resonate with voters at this time of year -- needling the IRS over its efficiency and fairness.

Officials from the beleaguered agency will make another appearance on Capitol Hill Wednesday, while the House is taking up a series of bills aimed at reining in the IRS. In the wake of last year’s controversy over the unfair scrutiny some political groups received from the IRS, the move seems like a no-brainer.

At the same time this week, a House Republican leader is unveiling a plan for comprehensive tax reform -- a long sought-after goal that carries significantly more political risk in an election year. The plan, produced by House Ways and Means Committee Chairman Dave Camp, R-Mich., seeks to simplify the tax code and lower rates for individuals and corporations while raising the same level of revenue.

Camp’s plan would drop the top income tax rate from 39.6 percent to 25 percent and would reduce the number of income tax brackets from seven to two. It would also impose a surtax on some income above $450,000, though that would not apply to capital gains or investments. 

The reforms would be revenue-neutral, ignoring Democrats’ interest in raising more money by closing loopholes. Yet in order to stay revenue-neutral while lowering rates, the plan would have to eliminate or reduce popular tax breaks.

"It's much simpler, and one of the things we do is raise the standard deduction so fewer people itemize," Camp told CBS This Morning. "That two brackets makes it easier to do taxes, it's at a lower rate as well, and that lower tax rate also causes the positive benefits of tax reform."

But given that Democrats and Republicans disagree on whether tax reform should be revenue-neutral -- and election year politics -- Senate leaders have already said Camp’s plan will go nowhere this year.

“I think we will not be able to finish the job, regretfully, in 2014,” Senate Minority Leader Mitch McConnell, R-Ky., said Tuesday. “Now, if we had a new Republican Senate next year, coupled with a Republican House, I think we could have at least a congressional agreement that this is about getting rates down, and making America more competitive.”

Senate Majority Leader Harry Reid, D-Nev., gave a similarly negative outlook. “The truth is we should have tackled tax reform years ago,” he said. “It would be extremely difficult... with the obstruction that we get here from the Republicans on virtually everything.”

Camp said it's worth putting the issue up for public debate. 

"My job is to present this option to the American people," he told CTM. "They'll ultimately decide if we'll move forward on this or not, but I think when people see we can make their lives better through a simpler, fairer, flatter tax code, I think they'll be excited about it." 

Camp is also a key player in another effort the House is pursuing this week -- reining in the IRS. That

The Ways and Means chairman is one of the lawmakers behind the “STOP Targeting of Political Beliefs by the IRS Act,” which would halt for one year new IRS regulations that would significantly limit the way certain nonprofit groups can engage in political activity.

The new proposed rules were designed to handle the burgeoning number of groups seeking to be designated as tax-exempt, nonprofit “social welfare” organizations -- which are allowed to spend unlimited sums of money on politics as long as politics isn’t their main focus. Republicans argue the rules would only encourage the IRS to harass groups that attempt to speak out politically.

Camp said earlier this month that the proposed rules were “drafted in a manner, in my view, to shut down tea party groups.”

The House will vote on this legislation next week, before the administration closes the public comment period on the new rules. The proposed rule change has clearly hit a nerve with the public -- IRS Commissioner John Koskinen said earlier this month that the IRS has tens of thousands of comments on the draft rules, setting a new record for the number of comments any draft federal regulations have ever received.

The White House on Tuesday issued a veto threat against the Camp legislation. The bill, it said, “could prevent the IRS from administering the tax code more effectively and from providing greater clarity to organizations seeking tax-exempt status.”

Camp’s legislation was one of several pieces of legislation listed in a memo that House Majority Leader Eric Cantor, R-Va., sent to House Republicans sent last week related to “protecting the First Amendment and stopping government abuse.”

Two other bills listed in the memo -- and passed in the House on Tuesday night -- also specifically tighten IRS regulations. The “Taxpayer Transparency and Efficient Audit Act” would require the IRS to alert taxpayers when it has shared their tax information with other government agencies. It also places a time limit on how long an individual can be subjected to an IRS audit. The “Protecting Taxpayers from Intrusive IRS Requests Act” would bar the IRS from inquiring about an individual’s religious, political or social beliefs. Both bills were sponsored by Rep. Peter Roskam, R-Ill.

The House keeps up its IRS scrutiny in a set of hearings this week as well. In a subpanel of the House Appropriations Committee, lawmakers will hear from Koskinen, the IRS commissioner, as well as Treasury Inspector General for Tax Administration J. Russell George and IRS National Taxpayer Advocate Nina Olson.

“As individuals, families, and businesses calculate how much money they are sending to the IRS, Congress must do its part to try and straighten this agency out,” said Rep. Ander Crenshaw, R-Fla., who is chairing Wednesday’s hearing. The IRS must be held accountable for its operations and use taxpayer dollars effectively: that’s the bottom line.”

Meanwhile, a subpanel of the House Oversight Committee on Wednesday is holding a hearing called, “Is the Obama Administration Conducting a Serious Investigation of IRS Targeting?” The panel will hear from former Justice Department officials but no current members of the administration.

A day later another House Oversight subpanel will hear from a variety of groups, including the ACLU and Tea Party Patriots, on the potential impact of the proposed IRS rule changes.

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