U.S. Congressman Paul Ryan Serving Wisconsin's 1st District

U.S. Congressman Paul Ryan Serving Wisconsin's 1st District

U.S. House of Representatives

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At a time when Wisconsinites are facing economic uncertainty, a high unemployment rate and a rise in the costs of living, the last thing our country needs are tax increases.  Our country faces many challenges. U.S. economic growth is too slow, and our national debt has recently eclipsed the size of our economy — now well above $17 trillion dollars.  Too many families are stuck in foreclosure, students continue to struggle with meeting their tuition payments, and the price of gas remains too high. 

Washington owes the American people a better path forward.  That is why I introduced "The Path to Prosperity: A Responsible, Balanced Budget," a budget resolution for FY2015 that will reduce our deficits by $5.1 trillion over ten years.  On the current path, from fiscal year 2015 to fiscal year 2024, spending will grow, on average, by 5.2 percent per year.  Under our budget, spending will grow, on average, by 3.5 percent per year — which is hardly draconian despite what critics often claim. Among other things, this budget will cut wasteful government spending, fix our broken tax code, protect and strengthen important priorities like Medicare and national security, and reform welfare programs like Medicaid to ensure that they are available to those in need. By balancing the budget and tackling our debt, the Path to Prosperity will grow our economy today and ensure our children and grandchildren inherit a stronger, more prosperous America.  This budget came before the House for a vote on April 10, 2014, and was passed by a vote of 219 – 205.  I was encouraged that my colleagues chose to support commonsense spending restraint, much-needed economic growth, and a balanced budget.  By balancing the budget and tackling our debt, this budget will help grow our economy today and ensure the next generation inherits a stronger, more prosperous America.

Congressional Investigation into IRS Targeting

Concerns on both sides of the aisle have been raised about information that has come to light about the IRS and their tactics with organizations applying for tax-exempt status.  Congress has been investigating reports of such conduct for more than two and a half years.  As early as June 2011, Representative Dave Camp, Chairman of the House Committee on Ways & Means, sent a letter to Douglas Shulman, the Commissioner of the IRS at that time, regarding the potential targeting of conservative donors and audits of certain types of tax-exempt organizations.  On April 23, 2012, Representative Charles Boustany and 61 additional House Republicans also addressed a letter to then-Commissioner Shulman inquiring about reports that “numerous nonprofit civic organizations across the country have experienced extensive delays and received excessively burdensome information requests” in their attempts to gain tax-exempt status.  In addition to these letters, IRS officials were questioned about these practices numerous times during Congressional hearings.  However, in all of their responses to these inquiries, IRS officials never acknowledged the discriminatory practices, which we now know to be true.  In one particular instance, when questioned about these practices during a House Oversight Subcommittee hearing, then-Commissioner Shulman stated, “I can give you assurances…there is absolutely no targeting.”  However, on May 10, 2013, Lois Lerner, the Director of Exempt Organizations for the IRS, admitted during an appearance at a legal conference that the IRS had indeed practiced discrimination in their handling of applications of conservative organizations for tax-exempt status. 

Soon after, on May 15, 2013, the Treasury Inspector General for Tax Administration (TIGTA), which provides independent oversight of IRS activities, released a report that found that the IRS had implemented a system of “filters” in order to target organizations applying for tax-exempt status on the basis of the organization’s political views.  Specifically, organizations were singled out in cases where (1) “Tea Party,” “Patriots,” or “9/12 Project” were referenced in the case file, (2) their issues included government spending, government debt or taxes, (3) they practice education of the public by advocacy/lobbying to “make America a better place to live,” or (4) a statement in the case file criticized how the country is being run.  The applications of organizations who met these criteria were subject to extraordinary processing delays — some waiting nearly three years.  In addition to delaying these applications, these targeted organizations were further scrutinized with unnecessary questionnaires and requests for sensitive information, such as resumes of all past or present employees, a list of past and present board members, and details of all interactions with press or media.

In light of the TIGTA report confirming that these discriminatory practices did indeed take place, various Congressional Committees have held hearings and called on IRS officials to testify regarding these issues.  On Friday, May 17, the House Committee on Ways & Means held a hearing on the IRS’s targeting of conservative organizations.  As a member of this committee, I had the opportunity to question the outgoing Commissioner of the IRS, Steven Miller.  During this hearing, I asked Mr. Miller about previous statements that he and other senior IRS officials had provided to Congress that failed to acknowledge these discriminatory practices even when, according to the TIGTA report, these officials had been aware that conservative organizations had been targeted since June 2011.  Mr. Miller responded to my question by stating that he had answered previous questions about this issue “truthfully.”  However, given what we now know from the TIGTA report, I find Mr. Miller’s answers to be more misleading than truthful.

As the Committee investigation continues, the IRS has issued proposed regulations that would alter 501(c)4 tax exempt organizations activities and restrict First Amendment rights. Believing that it is premature to publish these rules before the investigation has concluded, the House Committee on Ways and Means convened to consider H.R. 3865, the Stop Targeting of Political Beliefs by IRS Act of 2014, on February 11, 2014. This bill would prohibit, for one year, the Treasury and IRS from finalizing their proposed 501(c)(4) regulations, which were published on November 29, 2013. Under these proposed regulations, 501(c)4 organizations cannot engage in voter registrations and get out the vote activities or convene candidate forums without jeopardizing their tax exempt status even though those activities are allowed for 501(c)3 organizations. Instead of these rules, H.R. 3865 would provide that the criteria used to determine whether an organization is operated exclusively for the promotion of social welfare for the purposes of attaining section 501(c)(4) would be the criteria that was in effect on January 1, 2010 — prior to the targeting of conservative groups. H.R. 3865 was passed in the House on February 26, 2014 — with my support — by a vote of 243 to 176.

Furthermore, on May 7, 2014, the House took additional steps to further the investigation of the actions of the IRS. Representative Darrell Issa introduced H.Res. 574, a resolution recommending that the House of Representatives find Lois Lerner in contempt of Congress for her refusal to comply with a subpoena duly issued by the Committee on Oversight and Government Reform. This resolution passed with my support by a bipartisan vote of 231 to 187 on May 7, 2014. The House also had the opportunity to vote on H.Res. 565. This bill would call on Attorney General Eric Holder to appoint a special counsel to investigate the targeting of conservative nonprofit groups by the IRS. H.Res. 565 was passed in the House by a bipartisan vote of 250 to 168 — with my support — on May 7, 2014.

It is important that Congress continues to investigate these issues in order to fully understand why these discriminatory practices ever occurred, and to ensure that they never happen again.  The IRS states that their mission is to “provide America’s taxpayers top quality services by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.”  It is clear that, in the case of handling these applications, the IRS failed to adhere to these principles.  No matter what the political affiliation is of an organization, they should not be subjected to this biased, inappropriate treatment.  There are many questions that remained unanswered, such as why the IRS found it necessary to target these conservative organizations, why the IRS mislead Congress and the public, and exactly who was responsible for implementing these practices.  The American people deserve to know the truth, and I am committed to working with my colleagues in Congress to ensure that these questions are answered. 

Fixing the Broken Tax Code

Our tax system should be simple, fair, and promote economic growth; but the U.S. tax code fails on all three counts. It is notoriously complex, patently unfair, and highly inefficient. The tax code's complexity distorts decisions to work, save, and invest, which leads to slower economic growth, lower wages, and diminished job creation. It is estimated that individuals, families, and employers spend over 6 billion hours and over $160 billion a year trying to understand a labyrinth of rules. Over the past decade, more than 4,400 changes have been made to the tax code, which averages to more than one per day. This budget proposes to solve these problems by calling for a reformed tax code.

Currently, the U.S. corporate tax rate is just over 39 percent — the highest rate in the industrialized world. Additionally, the top federal rate on smaller, unincorporated businesses reaches 44.6 percent. Roughly half of all U.S. active business income and half of private-sector employment are derived from these businesses — such as partnerships, S corporations, and sole proprietorships. These high tax rates discourage investment and job creation, distort business activity, and put American businesses at a competitive disadvantage. It is also important to note that in Wisconsin; approximately 9 out of 10 businesses file their taxes as individuals. These small businesses, known as "sub-chapter S corporations," limited liability corporations (LLCs) and partnerships employ more than half of all private sector workers. With two-thirds of the net new jobs in America being created by small businesses, raising taxes on these businesses would kill job creation — especially at a time when some of our foreign competitors are lowering their tax rates on business as low as 15 percent. By making the tax code more conducive to innovation and investment, we can stimulate job growth and get the economy back on the road to recovery.

The Path to Prosperity would simplify the tax code to make it fairer for American families and businesses. Our plan would reduce the corporate tax rate to 25 percent and transition the tax code to a more competitive system of international taxation, creating a level playing field between American businesses and their foreign competitors, which would help keep jobs in the U.S. The tax code for individuals would also be simplified, consolidating the current seven individual-income-tax brackets into two brackets — setting the first bracket at 10 percent and the top bracket at 25 percent. Economists have shown that lowering overall rates and broadening the tax base will promote economic growth and support job creation the private sector. By implementing these reforms to our tax code, we can protect the American dream for generations to come.

The President’s budget proposal for Fiscal Year (FY) 2015

On March 4, 2014, the President released his budget for fiscal year 2015 — one month past the statutory deadline.  .  Since entering office, President Obama has already increased taxes by $1.7 trillion.  Now, with the introduction of this budget, the Congressional Budget Office reports the President is asking for an additional $1.4 trillion on top of that.  Unlike the House-passed budget, which calls for revenue-neutral tax reform, roughly half of these new taxes would be dedicated to spending rather than deficit reduction. 

Ways & Means Chairman Dave Camp’s Tax Reform Proposal

On February 26, 2014, Chairman Dave Camp introduced his plan to fix our broken tax code.  Among other things, this plan would flatten the tax code by reducing rates into two brackets of 10 and 25 percent for nearly all taxable income, repeal the Alternative Minimum Tax, and tax long-term capital gains and dividends as income but exempt 40 percent of such income from tax.  According to independent analysis by the nonpartisan Joint Committee on Taxation, Chairman Camp's proposal would create up to 1.8 million new private sector jobs, allow 95 percent of tax filers to get the lowest possible tax rate, and strengthen the economy by increasing Gross Domestic product by up to $3.4 trillion.  The Joint Committee on Taxation also estimates that this tax reform plan would increase take-home pay for a family of four earning $51,000 (the median U.S. income) by $1,300. For more details, please visit http://tax.house.gov/.

Chairman Camp's plan is a great first step toward a much-needed debate over how to best reform the tax code.  These reforms would help get the economy growing and offer much-needed relief to hardworking Americans.  Simplifying the tax code would ease the burden on families and businesses that waste too much time, energy, and money trying to navigate a broken code.  I believe Congress must work diligently to offer real solutions to fix our tax code, and I remain committed to advancing reforms that make the American tax system more simple, fair, and efficient to promote innovation and sustained job creation in the private sector.

I commend Chairman Camp for putting together this detailed proposal.  While no plan is perfect, Members of Congress should offer alternatives or tell Americans why they continue to defend a nightmarish tax code that works only for the well-connected.  Rather than maintaining the status quo, I will continue to advocate for meaningful changes to our nation's broken tax system.

Additional Information

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