Capitol Hill

April 15 is the date on which most Americans file personal income tax returns. The White House and both parties in Congress will use the week of April 15 to spotlight pro-taxpayer initiatives. But with Republicans controlling the executive and legislative branches, it is their tax proposals that establish debate parameters. However, such proposals ultimately must generate bipartisan congressional support to become law.

On Jan. 7, President Bush announced the establishment of a bipartisan panel to recommend options to reform the tax code. The panel's charge is to make the tax code simpler, fairer and more pro-growth to benefit all taxpayers. Former Sens. Connie Mack (R-Fla.) and John Breaux (D-La.) are chairman and vice-chairman, respectively, of the President's Advisory Panel on Tax Reform. The panel will submit to the secretary of the treasury a report containing revenue-neutral policy options for reforming the federal Internal Revenue Code no later than July 31.

Early indications suggest the panel is more interested in incremental changes to the current system rather than sweeping changes to replace it.

For example, the panel appears to be much more interested in a value-added tax, which is a consumption tax, rather than a flat tax that would do away with all deductions and establish one tax rate for everyone.

An incremental approach is favored by the U.S. Chamber of Commerce and other business lobby organizations that do not want the president diverted by an overly ambitious tax reform agenda while so many difficult business issues are in play. The biggest issue, of course, is Social Security reform, and it is requiring nearly a full-time national campaign from the president to educate the public.

CoMPASS

On Feb. 24, NRCA Director of Federal Affairs R. Craig Silvertooth and I attended a White House briefing addressing Social Security by Senior Advisor to the President Karl Rove, Deputy Senior Advisor Barry Jackson and head of the president's National Economic Council, Alan Hubbard. As explained with incontrovertible data, the implications for future generations if nothing is done to halt Social Security's path toward bankruptcy are staggering. In response, NRCA has joined other leading pro-business associations in the Coalition for the Modernization and Protection of Social Security (CoMPASS).

CoMPASS will ensure the business community will have an effective voice in this debate and proposed remedies will not simply involve raising taxes. In a subsequent White House visit, I was pleased to inform Jackson NRCA had joined the coalition.

Tax legislation

On Feb. 10, I attended a meeting with House of Representatives committee chairmen to discuss their agendas for the 109th Congress. House Ways & Means Committee Chairman William Thomas (R-Calif.) explained he planned to move Social Security reform to the end of this year or early next year as part of a broader tax bill that could include corporate provisions and proposals from the president's tax reform panel.

With domestic spending in the fiscal 2006 federal budget expected to dominate congressional debate this spring, Republican leaders are working to fit all the pieces of the tax cut and budget formula together in a reconciliation bill. In addition to Social Security and tax reform, they want to extend tax breaks that expire at the end of 2005. These include the alternative minimum tax (AMT) exemption, deduction of state and local sales taxes, and the welfare to work and work opportunity tax credits. There also will be an effort to permanently repeal the estate tax, scheduled to fully return in 2011.

R2T2

Anticipated tax legislation will present opportunities for the Realistic Roofing Tax Treatment Act (R2T2), which would shorten the depreciation tax schedule for nonresidential roof systems from the current 39-year schedule to a 20-year schedule. NRCA and the Asphalt Roofing Manufacturers Association have retained Lee Johnson, chief executive officer of the Lee Johnson Group, a lobbying firm, to leverage R2T2's visibility on Capitol Hill. Johnson will work to get the Joint Committee on Taxation to quickly generate an official measure of R2T2's revenue effects. He also will generate co-sponsors when R2T2 is introduced and help build a coalition to support the bill.

How it looks

The legislation in this Congress will be affected by tax reform recommendations, as well as a debate on Social Security reform and budget constraints. As the situation changes throughout the year, NRCA will lobby for industry goals, including permanent estate tax repeal and passage of R2T2.

Craig S. Brightup is NRCA's vice president of government relations.