Reforming Federal Taxes Efforts Could Be Building Momentum

Reforming Federal Taxes Efforts Could Be Building Momentum

The desire to reform federal taxes has managed to generate substantial momentum, an InvestmentNews opinion piece asserted.

The piece, which was published March 15, went live after President Barack Obama, Rep. Dave Camp (R-Michigan) and Sens. Marco Rubio (R-Florida) and Mike Lee (R-Utah) proposed different plans for revising the federal tax structure.

These proposals all contain common themes of simplifying the tax code, along with spurring more robust economic growth and job creation. However, the methods they offer to achieve these ends vary significantly. While these plans aimed to affect many different aspects of tax policy, this particular article will delve into how they would impact corporate taxes.

Obama proposal

Obama provided his proposal during the State of the Union address in January, suggesting making corporate income tax policy simpler and giving companies greater incentive to repatriate their earnings instead of retaining them overseas.

By making it more appealing for corporations to take these profits earned overseas and then move them back home, federal tax law could enable greater investment and hiring in the U.S. In addition, making the federal tax code less intricate would help trim business costs by eliminating superfluous staff involved with accounting.

Camp’s proposal

Camp’s proposal – The Tax Reform Act of 2014 – would cut the top corporate income tax rate to 25 percent from 35 percent. In addition, his plan aims to eliminate the Alternative Minimum Tax for both pass-through businesses and corporations. An analysis conducted by The Joint Committee on Taxation predicted that Camp’s proposal would generate multiple benefits:

• Gross domestic product would rise as much as $3.4 trillion.
• The economy would create up to 1.8 million new private sector jobs.
• The tax changes would not increase the budget deficit.

Marco-Rubio plan

In March, Marco and Rubio announced a new tax proposal, which, like the aforementioned plans, would cut the top corporate income tax rate to 25 percent from 35 percent. In addition, the plan would permit firms to engage in full expensing, a greater benefit than what exists under current tax law.

When speaking with members of the media, he emphasized that his main concern was helping jumpstart economic growth, instead of determining which groups will benefit at the expense of others, according to The Washington Post.

One major issue that has come up is the impact on tax revenue, the InvestmentNews piece noted. According to the Tax Foundation’s initial review, the Marco-Rubio plan would cut tax revenue by $414 billion a year. The two senators have emphasized that when the reform’s impact on economic growth and the resulting increase in tax income is considered, the figures would be different.

The Tax Foundation came back and stated that while it would take 10 years for the aforementioned growth to completely come to fruition, but once this happens, it would result in a $90 billion increase in annual tax revenue.

While lawmakers may not approve this particular plan, it is entirely possible they will end up finalizing something slightly different. These government officials seem to have plenty of options to choose from. Maybe this abundance of different plans will combine with the existing desire for change to spur helpful reform.