Visiting Professor Rebecca Kysar wrote an op-ed on the GOP’s tax reform bill in The New York Times.
With this week’s House floor vote and a Senate Finance Committee markup, the Republican tax plan is hurtling toward passage by year’s end — a timeline that is frenzied compared to that of previous tax reform efforts, which took years and extensive debate. Many people in both parties believe the tax code needs to be modernized, especially regarding how businesses are taxed. Yet the policy choices Republicans have pursued in their grand reformation of business taxation reflect a pre-digital, pre-global economy. With their bill, they may well ensure that the United States economy is left behind once and for all.
Republicans have promised simplification of the tax system. Instead, they have introduced even more complexity. This results, in part, from their choice to favor certain business activities over others, substituting congressional judgment for market pressures. And the privileged sectors are precisely those that are in decline.
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Instead of modernizing the taxation of business income, Republicans have doubled down on outdated concepts like corporate residence and origin of income that have become meaningless in a global and digital economy, while also attempting to preserve dying industries. The result is a dizzyingly complex system that will interfere with market forces.
Other countries have increasingly relied on consumption taxes as pro-growth alternatives to traditional business income taxes. The United States, however, remains wedded by politics and ideology to an inefficient, easily manipulated and antiquated tax policy. Rather than driving the United States to be a competitive force in the 21st century, the Republicans’ plans hold the United States back in the last one.