The congressman spoke with Portfolio for this “Window on Washington,” providing his insight on his time in office, President Bush’s tax bill, further changes to the tax laws and the importance of the RIA.

On Changes in the House

Now in his eighth term, McCrery says he has seen a number of significant changes in the House. The biggest change occurred in 1995 when control of the House shifted from Democrat to Republican. “I operated for six years in the minority, and I can tell you that being in the majority is better and quite different,” McCrery says.

Early in McCrery’s time on the Hill, the House voted to do away with honoraria in favor of increased pay from the taxpayers. “I thought it was a significant event because it took special interest money out of the pockets of members of Congress,” he says. “It is one thing to give money to a campaign, which can’t be used by a Congressman for his personal use. It is quite another to put money into his pocket that he can spend on anything he wants. I thought that was a very healthy change and made Congress a better place.”

Another significant change that continues to be felt today was the reapportionments in 1999 and 2000 of political districts across the country, which made most districts either solidly Republican or solidly Democrat, McCrery says.

“So, very few members of the House now really have to worry about re-election. That has contributed to a heightened level of partisanship in the House and a more divided House in terms of Republicans and Democrats,” he says.

“The tax system unfortunately is riddled with inequities and provisions that cause various sectors of our economy problems. We ought to be continually trying to clean up the tax system to address those particular provisions that are unfair or cause undue burdens to the taxpayer.”

As a result, McCrery says there will only be about 40 seats in play every election—at least until the next reapportionment in 2010. And although it is too early to tell, he says that gives Republicans a good chance to retain their House majority in 2004.

“There is not likely to be much turnover in the House. You could see either party gain a handful of seats depending on the conditions when Election Day 2004 rolls around,” McCrery says, adding that a new district map possibly being drawn in Texas and the likelihood of some Democrats retiring who have been in the minority for the last decade may also benefit the Republicans. “At the margin anyways, conditions favor Republicans. But if the economy gets worse than it is now and the President’s approval numbers drop significantly between now and Election Day, it is possible the Democrats perhaps could pick up a handful of seats. But bottom line, I think Republicans will maintain a majority in the House.”

Similar results are expected in the Senate come Election Day, McCrery says. “Clearly the numbers are on the Republicans’ side. You have a great many more Democratic Senators who are up for re-election than Republican Senators,” he says. “That bodes well for Republicans maintaining the majority in the Senate.”

On His Role in Congress

A former member of the House Armed Services Committee, McCrery is now a senior member on the House Ways and Means Committee and has been described by the Congressional Quarterly as one of the committee’s “key players.” He serves as the Select Revenue Measures Subcommittee chairman and serves on the Health and Human Resources Subcommittees.

“I work hard to try to make sure that I am well prepared for our committee’s business. I take part with the chairman and other members in highlighting ideas for possible legislation,” he says.

Even though he has sponsored numerous pieces of legislation, there was no hesitation when asked for the one with which he was most proud to have been involved: the 1996 welfare reform legislation, for which he played a key role in writing the legislation and getting it on to President Clinton’s desk. “Welfare reform has turned out to be a great success. It is the biggest change in social policy we have had in this country since FDR,” McCrery says. “We did so much good for so many people with that legislation (Personal Responsibility and Work Opportunity Reconciliation Act of 1996), not only for the individuals involved but for the country. That has to stand out as the highlight.”

McCrery says, not surprisingly, the economy will be the biggest issue facing the House Ways and Means Committee over the next 12 months.

“We’ve got to monitor economic activity, monitor the effects of the tax cut that we’ve already made and constantly be ready to make adjustments in fiscal policy, vis-à-vis the tax code, to maximize the opportunity for economic growth,” the congressman says.

On the President’s Tax Bill

In regards to the President’s “Jobs and Growth” tax bill, McCrery says he is optimistic that it will have a very positive effect on the economy, which was the intent of the legislation.

“It is going to provide some very strong incentives for small business owners to invest in their companies—they can buy new equipment with their greater cash flow, they can hire more workers. It is those kinds of activities that we hope will be stimulated by the tax cut and that, of course, will result in a higher level of economic activity and a higher rate of economic growth,” McCrery says. “That in turn will result in higher revenues to the government and can eventually get us back to a balanced budget. I believe the tax cut combined with the tax cut of last year and the monetary stimulus that is in the economy will turn this economy around—barring any additional terrorist attacks on our soil.”

While he describes himself as “cautiously optimistic” about the economy over the next 12 months, McCrery says he does believe there are additional changes that must be made to the tax system.

“The tax system unfortunately is riddled with inequities and provisions that cause various sectors of our economy problems. We ought to be continually trying to clean up the tax system to address those particular provisions that are unfair or cause undue burdens to the taxpayer,” he says. On July 25, House Ways and Means Committee Chairman Bill Thomas (R-CA) introduced H.R. 2986 The American Jobs Creation Act of 2003, which McCrery says, “contains provisions that have been begging for attention for years and are causing our domestic multinational corporations to be less competitive in the world marketplace than they should be.”

In addition to aiding those U.S. companies operating abroad, McCrery says other tax issues that must be addressed include the Alternative Minimum Tax (AMT), both for corporations and individuals, and the death tax.

“There are lots of significant changes in the tax system that I would like to make. I would like to simplify the way we tax business in this country. Our plate could be full if we really wanted to dive in and clean up the entire tax code,” he adds.

Given so many issues that need to be addressed within the tax code, McCrery says it is likely there will be at least one tax bill annually while President Bush is in office. “I think it is likely we will see a tax bill every year under President Bush because I think the President agrees with me that there are things in the tax code which need to be addressed and cleaned up,” he says.

On the RIA

This year, McCrery is leading an effort in Congress to address tax issues as they relate to REITs. McCrery and Ben Cardin (D-MD) were joined by more than three-quarters of the House Ways and Means Committee in introducing the REIT Improvement Act (RIA) in the House, and similar legislation is also pending in the Senate. There is still optimism the legislation could be passed before the end of this Congress. As McCrery says, there are issues in the tax code impacting REITs that have been left unaddressed for too long, even though they are counterproductive and need to be changed.

“Certainly over the last few years the evidence has mounted that unless we change some of these tax provisions affecting REITs, they will be disadvantaged in the marketplace,” McCrery says. “So the impetus for the introduction of the RIA was to clean up the tax code vis-à-vis the treatment of REITs and to make REITs an even better tool for investment in this country.”

One of the key provisions in the RIA is removing an obstacle to foreign investment in U.S. REITs, a huge market that companies are not able to fully tap, McCrery says.

“Removing this obstacle is critical because right now foreigners have to file an extra tax return if they get capital gains distributions from their REIT investment, and foreign investors don’t want to do that,” the congressman says. “So instead of investing in REITs they’ll invest in some other non-REIT investment vehicle. Unless we make this change and make it simpler and easier for foreigners to invest in REITs, then they are going to continue avoiding REIT investment here.”