Blog Posts Tagged With Lessons from 1986

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Transition Issues For a Move to the Destination Based Cash-Flow Tax

Two weeks ago, we previewed the destination based cash-flow tax (or DBCFT), the centerpiece of the House Republicans’ Blueprint for tax reform. In this post, we focus on one aspect of that proposal—the immediate deduction for capital expenditures—and how transition to immediate expensing might be implemented.

Policy choices for transition rules must take into account short-term and long-term effects on businesses, revenue effects and political considerations. Pro-growth rationales for tax reform tend not to favor prolonged phasing-in of expensing, but generous transition rules for the “losers” in tax reform may need to be offset, to some extent, by the phasing-in of expensing to achieve revenue neutrality.
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Tax Rates and Horse Trading

The House Blueprint and the President’s plan currently represent the primary visions for tax reform. Both would reduce tax rates for individuals and corporations (the House Blueprint caps the top individual rate at 33% and the corporate rate at 20%, while the President’s plan maxes out at 33% for individuals and 15% for corporations). Click here for a full comparison of the two plans. Although the administration’s position on revenue neutrality has not been entirely clear, the President’s nominee to head the Treasury Department, Steve Mnuchin, stated that the President’s tax plan would not increase the deficit after taking into account macroeconomic feedback and both House Speaker Paul Ryan (R-WI) and House Ways and Means Committee Chairman Kevin Brady (R-TX) have recently reiterated their commitment to pass a revenue neutral tax reform bill by the August recess.
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Setting the Stage for Comprehensive Tax Reform

Tax reform will be one of the top priorities for the 115th Congress. Hopes for pursuing tax reform to a successful conclusion are high, given one-party control of the government (and exuberant campaign promises). Following the 2016 election, Davis Polk laid out the background and context in which tax reform measures will be considered, with links to summaries of the leading proposals and details on the politics of tax reform. Although life in Washington has moved forward since this memo was published, the key points and players remain the same. Read on for things to watch.

Setting the Stage for Comprehensive Tax Reform, December 2, 2016

 
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