How Corporate Tax Reform Should Figure in Congressional Budget Proposal


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Having roundly ignored President Barack Obama’s budget proposal for fiscal year 2016 when it was introduced in February, Republican leaders in the House of Representatives are poised to introduce their own budget blueprint next week. The big question is whether new Budget Committee Chair Tom Price (R-GA) will follow in the footsteps of outgoing Chair Paul Ryan, who in recent years made a habit of releasing budget blueprints that were all hat and no cattle.

Ryan’s plans typically called for taking bold steps to reduce the federal budget deficit by eliminating tax “loopholes,” but were utterly silent on the question of whose ox should be gored in this process. By answering the easy questions (how far income tax rates should be cut) and refusing to even touch the hard ones (which loopholes should be closed), Ryan’s budget plans made budget-busting, highly regressive tax proposals the main topic at budget time each year.

Representative Price now has a valuable opportunity to depart from Ryan’s irresponsible approach to budgeting. If the committee’s new leaders are truly committed to achieving deficit reduction in a sustainable way, Price’s plan should:

1) Answer the hard questions first. Cutting income tax rates is simply not affordable unless congressional tax writers can first put together a well-defined plan for eliminating specific tax breaks, rather than vaguely calling for “closing loopholes.”

2) Raise new revenues through corporate tax reform. Our corporate tax raises less, as a share of the economy, than almost every other developed democracy. Corporate tax reform is of vital importance—but it must be done in a way that focuses on eliminating unwarranted tax breaks and increasing the yield of the tax. Revenue-neutral tax changes would miss an important opportunity to restore our nation’s fiscal balance.

3) Don’t leave states—and drivers-- in the lurch. Last year’s House Budget plan was silent on how to deal with the looming shortfall in the Highway Trust Fund, the nearly-depleted funding source that is supposed to pay for repairs and improvements to our vital, but crumbling, highway system. By refusing to take the obvious step of increasing the federal gas tax for the first time in two decades, Ryan’s budget forced states to fend for themselves in their efforts to maintain roads and highways.

 

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