House Ways and Means Chairman Kevin Brady, R-Texas, says he wants tax reform 2.0 to be about creating a culture of reform so that the country does not regress and wait decades to further streamline the tax code.
“I want to change the culture in Washington,” Brady said Wednesday during a speech on the future of tax reform at The Heritage Foundation.
“Tax reform 2.0 is really about tax reform and improvement every year, just like the continuous improvement our businesses undertake,” he said, adding:
It’s important for Congress every year to be looking at … how do we make America and our businesses more competitive, how do we make them more innovative, how do we become more family-friendly in our tax code, how do we become better as a nation?
The Ways and Means chairman said he wants Congress and the administration to explore reforms and policies where families can save earlier and more efficiently for education, retirement, and health care, and encourage innovation that builds on the reform Congress passed in December.
The last time the tax code was updated was in 1986 with President Ronald Reagan’s Tax Reform Act.
“We are never going to let America fall this far behind again,” Brady said. “The old way of doing things, which is to do tax reform once every 30 years and in between just adopt a bunch of special-interest provisions because people are scrambling to stay competitive, those days are over.”
During a panel discussion of tax experts following the chairman’s remarks, Scott Hodge, president of the Tax Foundation, said that Congress should follow the example states have set in their proactivity to make reform an ongoing process.
“There are many states that do this,” Hodge said. “Indiana, where the vice president was governor for so many years, did have a culture and does continue to have a culture of cutting tax rates each and every year, trying to refine its system to make it more competitive.”
Increased simplification of the tax system is also in the best economic interests of the country, Douglas Holtz-Eakin, president of America Action Forum, a conservative research organization, said during the panel.
“The left is going to want to unwind everything that just happened,” Holtz-Eakin said. “They are dead set on raising the corporate rate back up to 35, 40 [percent] if they can … And so phase two of tax reform has to include taking care of the other side of the ledger on the spending, so that there is better political positioning and economic positioning to avoid the need to do those kinds of things.”
The costs of businesses working to navigate the IRS code should also incentivize simplification, David Burton, a senior fellow in economic policy at The Heritage Foundation, said.
“We need to take seriously that we need simplification, particularly for businesses, because these things have costs. I believe you guys estimated that the compliance costs of the Internal Revenue Code is $400 billion a year … we need to simplify the system and this bill, while it had some very, very positive aspects, did not do that,” Burton said.
Adam Michel, a tax policy expert at The Heritage Foundation, told The Daily Signal in an email that an important priority going forward is making reforms of the Tax Cuts and Jobs Act permanent.
“The most important next step of reform is to make the [Tax Cuts and Jobs Act] permanent,” Michel said. “By making the recent reforms permanent and expanding expensing to structures, a reform highlighted by the panelists, Congress could double the expected growth from [the tax reform law].”
According to Americans for Tax Reform, 508 companies and counting have announced bonuses, raises, utility cuts, and other benefits due to Republicans’ tax overhaul, which went into effect Jan. 1.