In late August, President Trump went to Missouri to lay out some broad themes on tax reform. During his speech, he said that he would be disappointed if Congress did not act on this issue. However, passing actual changes to the tax code is much more difficult than outlining a set of principles.
With a full agenda consisting of finishing the federal budget and raising the debt ceiling (among other priorities), it will be very difficult to write a tax bill that gains bipartisan support prior to December. But members of Congress have also said that they want to get tax reform done, too.
Here are the priorities laid out by President Trump in his Missouri speech:
There is broad agreement by tax experts that this would be a good thing. The problem comes in deciding which loopholes to end. Every loophole, or deduction, in the tax code benefits someone; some group lobbied to get that deduction and that group will fight very hard to retain it. Whether these deductions are large ones, such as the home mortgage interest deduction, or small ones, such as the tax preparation fee deduction, members of Congress will face significant opposition to any proposed changes.
Lowering tax rates for businesses
There is also support for this principle among experts. However, cutting this rate will mean less revenue to the government. If the president does not want to see this tax plan contribute to higher deficits, then that revenue must be made up through raising other taxes or cutting spending.
Middle class tax relief
This principle is one that is politically popular. However, what type of tax relief? Will this mean more deductions for middle class taxpayers (which contradicts the first goal)? Or will it mean cutting rates for middle class taxpayers?
Allowing companies to bring back money held overseas
This is a fairly specific principle, in that it would allow U.S. businesses to repatriate foreign earnings. The current tax code taxes companies on the profits they earn overseas if they bring this money back into the U.S. This gives companies an incentive to invest this money outside the U.S. However, there will be resistance to allowing U.S. businesses to repatriate foreign earnings, from people who do not like the idea of giving a tax break for foreign profits.
What do you think of the president’s tax reform agenda? Do you think it hits the right points? Or do you think that Congress should pursue other tax reform ideas?