On August 24, 2016, the House Republican’s released the last part of their six-part vision/plan known as “A Better Way.” That part deals with tax reform. The plan offers some significant changes including moving business taxation to a consumption tax model at low rates (20% for corporations and a maximum of 25% for flow-throughs).
I also learned after having this short article published that the House Republican’s did some good marketing in calling their plan “A Better Way.” I received a few emails from readers telling me it was not a better way, as if that was my description of the plan rather than the House Republicans. While it has some good points, whether it is “a better way” than what we have now or other plans is for discussion. I think the plan can help us move to reform in how they talk about tax incentives – the numerous special deductions, exclusions, credits and preferential rates in the law. On page 9 of the plan, the House Republicans state:
Many of these tax preferences, sometimes referred to as ‘tax expenditures,’ are special-interest giveaways that are masked as tax breaks instead of direct grants. For fiscal year 2016, such ‘spending’ through the tax code amounts to more than $1.4 trillion, or almost three-fourths of the amount of revenue raised by the entire Federal income tax. When Washington picks winners and losers with the tax code, the American people ultimately pay higher tax rates and keep less of their hard-earned money.
I think that angle to describing tax preferences is not only correct, but necessary if tax reform that involves base broadening to allow for lower rates is going to occur. Lawmakers need to shift taxpayer thinking from these tax preferences being crucial to the system to seeing that they are what supports higher rates, inequities, lack of transparency, complexity and economic inefficiencies.
I assume that the staff of the House Ways and Means is working on legislative language for the plan. Perhaps we’ll see a hearing on it after the November election.
What do you think?
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