Tax reform will likely be the final showdown for 2017. President Trump wants a bill passed by Christmas. The next week or two will be critical in meeting that timeline but as we know: Congress is incompetent.
2017 Tax Reform Proposals
The House came out with a bill. Then the Senate came out with their version. There is plenty of coverage on what changes, who it may help, who it may hurt, etc. Here’s a quick primer on the key differences from Business Insider (correction to House corporate tax start year by me):
The question now is whether these differences end up creating a combined plan that is worse than either or if Congress deadlocks itself and ends up doing nothing.
The stock market responded negatively to the differences between the two plans. A failure to pass real tax reform will likely result in a fall in markets on sentiment alone. But that’s just Wall Street. What about the rest of us?
What the Economy Needs
Criticisms of the tax plans have largely been related to the various deductions that will be removed. Any group that benefited from a previous deduction thinks taking it away is some inhumane injustice. No one likes things taken away from them. I get it.
But a lack of real tax reform before year’s end will be unfortunate for everyone. The anemic 8 years of recovery since the Great Recession has been nothing to be proud of and we should not fool ourselves into thinking that we have put the Great Recession behind us. The tactics deployed to combat the Great Recession were questionable and have the potential to be the cause of the next downturn.
The current 4% unemployment rate looks good but it also means there is little room for it to get better and a lot of room for it to get worse. This is no time to get complacent and believe there’s plenty of time to wait for the perfect tax plan. Don’t let perfect become the enemy of the good.
Here’s what we need:
- The corporate tax rate needs to come down. In 2018.
- This 7 bracket clown show needs to end.
- The alternate reality Alternative Minimum Tax needs to go.
- Let our companies repatriate assets at a reasonable rate.
- Lower tax rates across the board and increase the standard deduction.
The rest of it can wait until 2018 to sort out.
We need little bets and small wins. Move the needle in the right direction step by step. Congress needs to pass a tax reform bill with the key drivers of growth this year.
Let me know in the comments if you agree we shouldn’t let disagreements block all progress, if you think I’m wrong and it should be all or nothing, or if you think I’m a capitalist pig.