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November 11, 2015

The Most Important Tax Reformer Was Not On the Debate Stage


There was a lot of talk about tax reform during last night’s Wall Street Journal/Fox Business Network Republican presidential debate.  Understanding the presidential candidates’ views on tax policy and tax reform is important, since it gives insight into their overall understandings of the relationship between tax policy and the economy. And successful tax reform requires a committed president to drive it and to sell it to the American people.

But let’s step back a minute. Presidents don’t actually write tax reform legislation—Congress does; specifically, the House Ways & Means Committee. Tax reform legislation is a series of hard-fought and hard-won tradeoffs and compromises—yes, including with the White House, but mostly on the legislative side of government.

Now that Texas Republican Kevin Brady chairs the Ways & Means Committee, he will have more to say about the details of any eventual tax reform than will the future president. So what really matters is Brady’s priorities, not Jeb Bush’s or Ted Cruz’s.

And Chairman Brady’s priorities are encouraging.

Consumption Taxes. Brady has been a sponsor of the National Sales Tax, which may unnerve some, but which he acknowledges is probably too far of a reach from where we are today. (Hopefully, Brady understands that an income tax that exempts savings and investment from taxation IS a consumption tax.)

Corporate Tax Rates. Brady thinks a 25 percent corporate rate isn’t low enough, especially since our competitors—i.e., other developed economies trying to lure businesses to their shores—have continued to lower their rates. “I want to go a lot lower than that,” Brady said to Stephen Moore, mentioning a rate of 15 to 20 percent. That’s very good.

Revenue Neutrality. Brady doesn’t seem to be putting himself within the constraints of revenue neutrality former Chairman Dave Camp worked within. His priority is stimulating economic growth. That’s very good.

International Taxation. Brady is prioritizing fixing international taxation as a first step toward overall tax reform. He wants to permanently address the tax provisions that cause the repatriation problem and ensure that American companies are globally competitive. That’s very good.

Tax Extenders. Brady wants to do away with the annual tax-extender circus and “negotiate a package of permanent provisions.” He correctly says that this change will create economic certainty for Section 179 expensing and various other tax provisions. That’s also good.

Economic Growth. Refreshingly, Brady stresses that economic growth is the reason to champion not only tax reform but also other policies like the Trans-Pacific Partnership trade agreement. Having economic growth as his top policy priority is very, very good.


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