Ringing in the New Year with Tax Reform

Now that Americans have rung in the New Year, attention turns to Washington as a new administration and a new Congress are set to take office. There has been much discussion on what legislative issues President-elect Trump will tackle both in his First 100 Days in office as well as the rest of 2017.  One item consistently at the top of that agenda is comprehensive tax reform which Treasury Secretary nominee Steve Mnuchin referred to as the Trump Administration’s “number one priority.”

Recently, NPR sat down with prominent former Reagan Administration economist – and Trump adviser – Arthur Laffer to discuss incoming president’s tax proposals:

“I think they are terrific. I think the corporate tax in the U.S. today is not only global in scope, which is a mistake – we have the single highest tax rate in the OECD – and it’s discouraging businesses, jobs, output, employment coming to the U.S. It’s driving business away through inversions and through formation of companies elsewhere. Dropping that tax rate to 15 percent would have a huge impact on the U.S. economy and would have very little impact, if any, on tax revenues from corporations, from businesses.”

Mr. Laffer is correct in his assessment of the consequences of our sky-high corporate tax rate and it is far past time to address this obstacle engrained in our antiquated tax code.  Doing so through corporate tax reform – and tackling individual rates – will bring tremendous economic benefits to the nation and the American taxpayer.

And while both Republicans and Democrats agree on the need to finally address our oppressively complex tax code, the idea of passing legislation through a budget procedure called reconciliation has been floated by some on Capitol Hill. This procedure, used by Democrats to push through Obamacare, only requires a simple majority to pass legislation.

Other lawmakers, however, have emphasized the need for bipartisanship in passing such consequential tax legislation, a notion that Mr. Laffer seems to favor:

“But when you look at tax policy, what you really want to do is try to get bipartisan support, like we had under Reagan, with both our sets of tax bills. …. you want to make it bipartisan. And you try to convince the others of your logic, and they try to convince you. And hopefully, you can make some ground.”

Regular order that allows for bipartisanship in this monumental task would certainly be the desirable route to take, as reaching 60 votes in the Senate would allow the new law to be permanent. Using reconciliation, on the other hand, would only permit a ten-year law to take effect. In the end, we must not get sidetracked and lose sight of a goal that is so close at hand. Tax reform is critical to our nation’s prosperity and must remain a top-priority for the new President and Congress.