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1 Kyle Pomerleau, Four Plans for Permanent, Pro-Growth Tax Reform in the 115th Congress 1 (2017)

handle is hein.taxfoundation/fouplmgtr0001 and id is 1 raw text is: SPECIAL REPORT No. 237 Sept. 2017 The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) non profit organization. ©2017 Tax Foundation Distributed under Creative Commons CC BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Four Plans for Permanent, Pro-Growth Tax Reform in the 115th Congress Kyle Pomerleau Economist, Director of Federal Projects Key Findings The House and Senate Republicans of the 115th Congress and the Trump Administration have put forth a number of important goals for tax reform: economic growth, simplicity, lower marginal tax rates on individuals and businesses, and a broader tax base. The Tax Foundation has put together four illustrative tax plans that demonstrate ways in which lawmakers could accomplish their goals, while keeping the level of federal revenue as a percent of GDP and the distribution of the tax burden roughly the same as current law. Option A focuses on removing the bias against investment from the federal tax code by converting the corporate income tax into a 22.5 percent cash flow tax, which would allow for full expensing of investments. This plan would increase the long run level of GDP by 7.1 percent. The plan is based on the House GOP Blueprint, but with a few alterations. Option B would scale down the current income tax system and replace the revenue with a broad-based, low-rate consumption tax, all while making the tax code more progressive than current law. We estimate this plan would increase the long run level of GDP by 3.2 percent. Option C follows the basic contours of the current tax system but makes improvements to both the individual income and corporate income tax codes. Option D would substantially lower business tax rates, in addition to other improvements to the income tax system, and require spending offsets due lower federal revenue in the long run. All four of these plans were modeled assuming that all policies were permanent. However, it is possible that lawmakers opt to make all or some of a tax plan temporary to navigate budget rules. Lawmakers should be cautious of using temporary policy. We modeled all of these tax plans looking at their impact on revenue after all policies have fully phased in. Many of these plans, though, could potentially impact revenue over the budget window in different ways, depending on how they are structured. For this analysis we did not include dynamic revenue estimates, as we limited our analysis to tax reform plans that would be deficit-neutral on a conventional basis. However, we estimated that all of these plans would improve the tax code and boost the long-run size of the economy, which would provide additional revenue.