House tax writers continue to dispute the effects of tax reform. The House Ways and Means Committee held a May 16 hearing examining the Tax Cuts and Jobs Act (TCJA) (P.L. 115-97).
Tax Policy Sides
During the hearing, Republican and Democratic lawmakers were sharply divided in evaluations of the TCJA. Republicans touted the TCJA’s effect on the economy, job growth, and investment. “The Tax Cuts and Jobs Act was designed to deliver tax relief to middle-income families and grow the U.S. economy – and we’re accomplishing both,” Ways and Means Chairman Kevin Brady, R-Tex., said during opening statements.
However, Democrats remained largely united in their criticisms of the new tax law for primarily benefiting the wealthy and large corporations. “Republicans wrote a law that gives 83 percent of the tax savings to the top one percent,” Ways and Means ranking member Richard Neal, D-Mass., said during opening statements. “That’s a great deal for the well-off and well-connected and a bad deal for American families.”
Comment. To elaborate further, 83 percent of the TCJA’s tax savings will eventually go to the top one percent, as Neal stated but only during 2027, according to current projections. The TCJA’s individual tax cuts are set to expire in 2025, which would cause the federal tax burden distribution to change in 2027, according to the Tax Foundation.
Tax Reform Phase Two
Currently, Republicans are gearing up for a “phase two” of tax reform. Tax reform “2.0” will include making permanent the individual tax cuts, a Ways and Means spokesperson told Wolters Kluwer, (TAXDAY, 2018/05/09, C.1). However, several lawmakers, Republicans and Democrats alike, have expressed doubt as for whether another tax reform bill could muster enough needed bipartisan support this year.
Business Tax Reform
Additionally, witnesses testifying at the May 16 hearing also had differing opinions on the effects of the TCJA. Steven Rattner, chairman and chief executive officer of Willet Advisors LLC, criticized the new law for primarily benefiting big business. “With respect to investment and our international competitiveness, I would reiterate what I said last year: that some restructuring of our corporate tax system was advisable,” Rattner said. “However, what emerged from the legislative process was less tax reform than simply a tax cut for businesses.”
To that end, the TCJA addressed significant flaws of the previous business side of the tax code, according to Douglas Holtz-Eakin, president of American Action Forum and former director of the nonpartisan Congressional Budget Office (CBO). Moreover, Holtz-Eakin expressed optimism for the future economic effects of the TCJA. “While it remains early, there is cause for optimism that the TCJA is having the desired effect: stronger growth, better investment, and an improved labor market for American workers.”
By Jessica Jeane, Wolters Kluwer News Staff