Tax Reform Delay Will Harm US Economy: CEOs

Joe Lawler, my colleague at the Examiner, reports that House Republicans are sticking with their original plan for a permanent, self-financing tax reform plan, despite indications from the Trump administration that its preferences differ (that is, they favor some form of border adjustability).

So, what they released last week, there wasn't all that much that was new information. That being said, there were a few small, specific tweaks.

Dropping the corporate tax rate would substantially reduce the incentive for USA companies to move or remain overseas, but the actual effects are hard to predict, according to an accounting professor at Duke University's Fuqua School of Business. Yet Trump's campaign proposals were skewed to the wealthiest Americans, and it's likely that his new proposal, once fleshed out, could be as well. Judging from its past calculations, the JCT is likely to agree with independent budget wonks, on the left and right, who have concluded that Trump's plan would create a gusher of red ink. However, considering his 100-days in office is nearing, Trump is eager to put this plan to action. But the principal difference between where the House is and where Trump came out last week was in the taxation of businesses and corporations.

And that is why under our plan, we are cutting the business tax rate all the way down to 15 percent, bringing thousands of new companies and millions of new jobs to our shores.

So why do I love the tax reform package that President Trump has proposed?

Trump has good reasons for wanting tax reform.

Congress has been working diligently on reform for several years, and President Donald Trump has made tax reform a top legislative priority. This policy would also make it very attractive for USA firms to relocate to the United States as the advantage of earning income offshore would no longer be relevant.

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Is there enough detail to determine who loses? "Big tax cuts ultimately turn out to be counterproductive, because the rising debt pushes up interest rates, which discourage business investment and purchases of homes, cars, and other big ticket items by consumers". Based on the analyses that we have done, there are a couple of things that you can say. More than two-thirds of respondents support allowing mortgage interest to be deducted from an individual's taxable income. China's corporate tax rate is 25 percent, Ireland's is 12.5 percent, and our neighbor Canada's is 15 percent.

"This will pay for itself with growth and with reduction of different deductions and closing loopholes", Mnuchin said at an April 26 briefing on the one-page outline of a tax plan. That is one of the major sources of concern, especially with the Trump proposals. "There are ways to navigate these obstacles", the statement said, "including the use of a longer horizon", meaning more time for cuts to generate growth and become revenue-neutral.

That is a big chunk of the savings. They intend to cover the price of lower individual and corporate rates by raising revenue from a new levy on imports and eliminating costly deductions. It depends on who falls in the tax brackets. The National Taxpayers Union calculates the top 5 percent of taxpayers pay 60 percent of the taxes. Other people can do it, you can't, and it's not fair to ask you to even think about it.

In exchange for those changes the rates were dropped.

The House proposal and the administration proposal are still subject to consideration and horse trading, but hesitation could translate into a lost competitive advantage.

In Kansas, Gov. Sam Brownback eliminated state taxes on pass-throughs, which turned out to be a boon for Bill Self, the coach of the University of Kansas' men's basketball team. Maybe they love the power they get? And the elimination of tax deductions and other loopholes would raise revenue as well, he contended.

What's more, some privately held large companies - including Trump's own real estate empire - are structured as pass-throughs and would benefit, too.

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