Capitol Connection: The Math Challenge of Comprehensive Tax Reform

In the next few weeks, Ways and Means Chairman Kevin Brady will introduce the committee’s “blueprint for comprehensive tax reform” and the expectations are that this blueprint will serve as guiding principles for the Republican conference going into not only the convention, but for tax reform action in 2017.

This spring has been a very busy time in Congress in terms of ideas for tax reform. There is widespread frustration with the complexity of the code as noted in Rep. Bob Goodlatte’s bill HR 27, which calls for the termination of the IRS after 2019 while offering six simple principles for its replacement. Clean the slate and start over. It may seem laughable, but HR 27 has 133 co-sponsors.

Regardless of which party takes the White House, the tax reform platforms of the candidates each call for comprehensive measures—both individual and corporate tax. But almost every reform measure has a problem. The math, when it comes to lowering the corporate rate, does not work without adding to the deficit in the long-term, even with short-term revenue influxes.

All of the presidential candidates have put forward their blueprint for tax reform and all of them have been careful to match their spending plans with revenue offsets. Despite their efforts, the rhetoric doesn’t quite add up. The Committee for a Responsible Federal Budget, a bi-partisan non-profit organization, recently weighed in on the impact of their proposals. CRFB found that the Sander’s proposal would add to the deficit $2 trillion to $15 trillion over ten years (adding 33% growth to the size of the government).Trump’s plan would add $12 trillion while Clinton’s plan, with higher taxes on the wealthy, basically breaks even, according to their analysis.

One year from now, we will know for sure if tax reform, a once-in-a-generation effort, is underway. It will require a strong administration with a motivated Treasury Department to stand behind it, a Congress that can collaborate and compromise, and the ability of both to overcome differences in the march toward simplification. If that happens, the gains we made last fall in the PATH Act for affordable housing and economic development could be challenged. The five-year New Markets Tax Credit extension could turn into a two-year extension, and the Housing Credit and Bonds could be re-examined once again. For the math to make tax reform work, all expenditures will be on the table, and only those that demonstrate that they provide for an activity that otherwise would not occur in the marketplace will be left untouched.

Your effort to educate members of Congress is more powerful than all of the lobbyists in DC. Your next chance to demonstrate how our programs work will be over the Memorial Day recess. Take a look at your calendar and schedule a meeting today. Don’t forget that candidates for Congress are just as critical and important to educate. We want everyone heading to DC to know that we are informed about what adds up and what doesn’t.

Bob Moss is a CohnReznick Principal and National Director of Governmental Affairs. Bob leads the Firm’s federal and state government relations efforts, particularly in the area of affordable housing. For more legislative insight from Bob, visit our Capitol Connection webpage.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.