Tax Reform Goals

The Trump administration and congressional Republicans are refining theirtax reform plan and ramping up their marketing efforts. It is a good plan so far, but  comments by some GOP leaders suggest that reforms may veer off-course as more details emerge.To keep policymakers focused on true reform, the table below summarizes five tax reform goals and the policy changes needed to achieve each.Tax reform is sometimes portrayed as a balancing act with various goals in conflict. But the table indicates the opposite. By adopting a lower, flatter rate structure and a more neutral tax base, policymakers would further multiple objectives at once: growth, simplification, fairness, and the strengthening of support for limited government.Tax Reform GoalsGoal  Policy ChangeComments1) Economic GrowthLow flat rate.     Neutral Base.Lower, flatter tax-rate structures cause much less damage because distortions rise with the square of marginal tax rates. Also, higher earners respond more strongly in their working, investing, and avoidance activities than do lower earners.   Eliminating deductions, credits, and other breaks would create a more neutral tax base that allowed resources to flow to the highest-valued uses. Reforms should also reduce the income-tax bias against saving and investment.2) SimplificationLow flat rate.        Neutral Base.  A simpler rate structure and more uniform base without narrow breaks would reduce costs of tax administration, compliance, and enforcem...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs