LAS COLINAS, Texas–What can be expected as Congress looks to tackle tax reform?
Credit unions will get one forecast during Catalyst Corporate’s annual Economic Forum here when one analyst offers some predictions.
Jesse Edgerton, an economist at J.P. Morgan in New York, who will be addressing “An Economic Outlook and Real News on Tax Reform” at Catalyst Corporate’s 40th annual Economic Forum Oct. 2-4, said, “Over the next few months, a lot of discussion likely will occur about procedural issues related to passing any sort of reform. All that is beside the main point. The focus should be on whether the Senate can find 51 votes to pass an extensive tax reform plan. Will we be able to lower tax rates without increasing debt too much?”
What type of package does Edgerton think Congress and the administration will be seeking?
“A fair amount of hope exists that we could potentially come together on some kind of broader tax reform package that could make tax code more efficient,” offered Edgerton, noting lawmakers are exploring options around a more comprehensive reform, rather than straight tax cuts.
But Edgerton concedes he’s not optimistic. “To pull off that type of reform, you need a way to increase lost revenue,” he said.
For example, a border adjustment tax, eliminating the deductibility of interest for corporations, or tapping mortgage interest deductions for households are the types of measures Edgerton suggests are necessary to reshape the tax code without giving up revenue.
“Pulling off a broad tax reform package would require making deals across multiple groups. Everyone must end up happy enough to support the reform effort,” he added. “That’s pretty difficult to do. In recent years, there’s been a lot of debate about reforming the corporate tax code. Many agree it would be good to make those reforms. It becomes difficult to move forward because of the tradeoff of who wins and who loses.”
With these obstacles, some analysts, including Edgerton, view the most likely path of tax reform a straight tax cut.
“It could be for personal taxes, corporate taxes or both, and it will be paid for by borrowing more,” said Edgerton. “A straight tax cut preserves the current structure of the code with all its current complexities.”
Would such a straight tax cut be similar to what the country saw in the early 2000s under President George W. Bush? “That’s a potential template,” said Edgerton.
“Even if we’re not able to reform the tax code this time around, we shouldn’t give up on that goal,” he suggested. “We can do much to improve the tax code, and a total reformation is an admirable goal for the future. Just because it may not happen this time around, doesn’t mean it won’t happen sometime in the future.”
For more info: catalystcorp.org/r/forum.