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The last major overhaul of the tax code happened 30 years ago under a Republican president. In 2017, under another Republican president, we have the opportunity to enact once-in-a-generation, pro-growth tax reform.
At the center of the debate will be Chairman of the House Ways and Means Committee, Rep. Kevin Brady (R-Tex.).
On Tuesday, Jan. 24, he visited the U.S. Chamber to outline his vision for tax reform.
Brady said (as prepared for delivery):
If we are serious about transforming America from a low-growth economy to a high-growth economy, we must move America away from its costly, complex, and unfair tax code.
Last April, I had the honor to speak at the Chamber on Tax Day about our approach on tax reform and the path forward. At that point, we were just a couple months into developing our Better Way tax reform Blueprint.
That day, I was excited to announce that we were working together to design a tax system that is built for growth and would leapfrog America back into the lead of the most pro-growth tax systems in the world for new jobs and new investment. And, I said then, we would enact that system into law in 2017.
Very few predicted President Trump’s election with Republican majorities in both the House and Senate would move us to closer to pro-growth tax reform than at any point in the last 30 years.
Right now, our Members and staff are hard at work turning the ideas of our Blueprint into tax reform legislation that delivers the 21st century tax code our nation needs. A tax code that is built for growth—the growth of families’ paychecks, the growth of local businesses, and the growth of our economy as a whole.
His blueprint includes the “lowest tax rates on American job creators in modern history… so local businesses can invest more in their workers, their community, and their future.”
Along with that, Brady wants dramatic changes to how businesses write-off investments:
For the first time in our nation’s history, businesses of all sizes will be able to immediately write off the full cost of new capital investments. This creates a tax-free return on purchases of new software, buildings, equipment, machinery and technology that businesses need to produce and compete at a higher level. These are key to increased productivity that drives higher wages and higher economic growth.
In addition, Brady’s tax reform blueprint “flattens out tax brackets and brings down rates for all taxpayers” and redesigns the IRS so it emphasizes customer service and responsiveness.
Brady also explained the most talked-about component of his blueprint, a border tax adjustment:
This border-adjusted tax is stunningly simple and based on a pro-growth principle: if your product or service is consumed in the United States it is taxed equally. It will bear the same rate of U.S. tax regardless of where it is produced, regardless of whether you’re a foreign company or a domestic one.
In tandem, if your product, service, or intellectual property is developed here and sold abroad, then your ‘Made in America’ export will no longer be subject to U.S. tax. This change immediately levels the playing field with our global competitors.
Many of our international companies already deal with border adjustable taxes in the more than 100 countries that currently impose them.
At the end of the year businesses will add up export sales and disregard them—they aren’t taxable. And at the same time you’ll add up import costs and disregard them—they aren’t counted as deductible expenses. Naturally, businesses are already doing these basic calculations anyway.
Brady argues that this approach “will dramatically simplify our international tax system and level the playing field for American businesses and workers.” This part of the proposal has elicited feedback across the spectrum. Further, the sheer novelty of this policy in American tax policy has left many taxpayers simply unsure of what to think without additional details.
With the goal of a more pro-growth tax code realistically possible, we need to look at the big picture. As Neil Bradley, Senior Vice President and Chief Policy Officer for the U.S. Chamber said at a press conference after the State of American Business address earlier this month: “It’s going to be important for us to look not just at those individual pieces but the tax reform as a whole.”
Rep. Brady started off what should be a fruitful debate of the possibilities and opportunities of tax reform.