A Joint Committee on Taxation report unveiled today made clear that eliminating every corporate tax credit and deduction would generate only enough revenue to reduce the corporate tax rate to 28 percent - well short of the 25 percent proposal Republicans have put forward - and raised questions about what else Republicans plan to cut to pay for such a dramatic rate reduction for corporations, or whether they will use budget ploys such as “dynamic scoring."
Tax experts this afternoon responded to the report:
Neil H. Buchanan, George Washington University Professor of Law: “The JCT is widely respected for its objectivity and expertise. When they provide an analysis of proposed changes in any aspect of the tax system, tax scholars and policy makers sit up and take notice. The conclusions of JCT's analysis of the corporate income tax are important, and they are not surprising to anyone who studies the tax laws. There is simply no way that the corporate tax rate can be cut to 25% without increasing the federal budget deficit. Even getting the rate down to 28% would require Congress to remove important tax incentives from the code, while increasing uncertainty for businesses who must plan for the future."
Martin A. Sullivan, Contributing Editor, Tax Analysts: “This report is the most authoritative estimate we have so far about how far the corporate tax rate could be reduced by repealing corporate tax expenditures. For tax policy wonks, it is not at all surprising. It confirms what tax economists have long suspected: It is extremely difficult, even under the most ambitious versions of tax reform, to get the corporate rate below 30 percent on a revenue-neutral basis. This report is official confirmation of what is common knowledge among experts."
Clint Stretch, Deloitte Tax LLP Managing Principal of Tax Policy: “This is an explicit statement of the reality that everybody’s known: that this is not an easy thing to do. You’ve got to reverse decades of long-standing tax policy to get to this lower rate, and it’s going to be painful to people who really rely on present-law incentives." (Source: Bloomberg News )
John L. Buckley, Georgetown University Law Professor: “The JCT analysis raises legitimate questions that must be answered. It is clear that to reach his goal of a 25 percent rate Chairman Camp must do more than eliminate items that are considered to be ‘tax expenditures.’ He must disallow long-standing deductions that most view as appropriate in determining economic income. Two such deductions, examined by the Congress in previous reform efforts, are the deductions for interest and advertising expenses. Chairman Camp needs to be clear on what his draft would do to these and other business tax provisions. It should also be noted that the Camp plan dramatically increases the uncertainty faced by U.S. businesses today. Companies plan their research and their major capital investments years in advance. They need to know whether they can continue to deduct immediately their research expenditures or and what the depreciation schedule will be for their new investments. Chairman Camp made a promise about tax rates in the draft he released last week that only increased the uncertainty."
