Search This Blog

Friday, April 22, 2016

Tax Reform in 2016?

While we are unlikely to see tax reform this year, there continues to be a lot of work going on in the tax committees on it.  And President Obama updated and released his framework for business tax reform this month (first report was released in Sept. 2012). I think the main impetus for the update was to address inversions to tie to the recent activities of IRS and Treasury.

At a speech to the U.S. Chamber of Commerce on April 15, Congressman Brady, chair of the House Ways and Means Committee stated:

"By June, we intend to produce a consensus blue print for comprehensive pro-growth tax reform."

There have been more hearings on tax reform including hearing proposals of members of Congress.

Senator Hatch, chair of the Senate Finance Committee, continues to work on his report on corporate integration (taxing corporate income once only).

As part of his April 15 speech, Congressman Brady also laid out his principles of tax reform.  Here they are along with those that Senator Hatch released in December 2014.

Congressman Brady:
1.Make tax code “simpler, fairer, and flatter.”
2.Close loopholes and “special interest provisions” to lower rates for all.
3.Make system competitive.
4.Encourage business activity in US & move from worldwide to territorial system.
5.Pro-growth tax reform.
6.Reform to improve tax system, not to address spending problem.

Senator Hatch (wants broader base, lower rates and territorial system):
1.Economic growth.
6.Promote savings and investment.
7.Revenue neutrality.

A lot of the principles can be met by removing or cutting back the roughly 250 special tax rules in our tax system such as the exclusion for employer-provided health insurance, the mortgage interest deduction, fringe benefits, credits, preferential rates, and more. That makes the law simpler, more equitable and transparent and neutral. It also allows for lower rates. Today's high rates exist because of so many special rules.

What do you think? Do you have any principles to add to the lists of Congressman Brady and Senator Hatch?

No comments: