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There is a reason why the U.S. has not seen a comprehensive overhaul of the U.S. tax code since 1986 — it’s hard. The debate in recent months over tax reform serves as a reminder of what an enormous undertaking it is to rewrite the tax code. The stakes are high, and the smallest changes can lead to unintended consequences. As lawmakers begin this debate, it is critical not to get bogged down by a single provision. Rather, they should examine the totality of the plan.
Tax reform has been in the making for years, and with Republicans in control of the White House and Congress, many lawmakers and policymakers view 2017 as a do-or-die moment for reform. The heightened sense of urgency comes from the limited number of days left on the legislative calendar and the desire to deliver a win to the American people. As Republican lawmakers race against the clock to overhaul the tax code by year’s end, internal bickering over which deductions, exemptions, and credits are worth preserving is threatening to upend the party’s ambitious efforts to deliver a simpler, fairer, and pro-growth tax code.
A meaningful overhaul will fix an outdated, overly-complex tax code that pushes U.S. investments abroad rather than create jobs at home. In the coming weeks, the House and Senate bills will undergo changes as they move through the legislative process. Lawmakers and stakeholders should be prepared to win some and lose some in order secure a grander victory: a simplified tax code that is built for growth and job creation.
Whatever form the bill may take, it must, at a minimum, include three key pro-growth provisions: a permanent reduction in the business tax rate; full expensing of business investments; and a shift to the territorial system of taxation with appropriate safe guards to prevent abuse. This trio of measures will do much to strengthen the global competitiveness of U.S. businesses and prime the economic engine for unprecedented growth. A more competitive tax rate coupled with the ability to write off business investments immediately and in full will give companies of all sizes the certainty they need to make bold, long-term decisions when it comes to expanding and hiring. Full expensing will also help correct the tax code’s preferential treatment of debt-financed investments.
So while heated arguments over parochial provisions may sow division or an all-or-nothing attitude, lawmakers must take pause and appreciate this once-in-a-generation opportunity to do something transformative for the American people. It is time to fix the broken tax code and help the U.S. economy unleash its full growth potential to improve the lives of all hardworking Americans.
Rosemary Becchi is a leading Washington tax lawyer and consultant who was formerly counsel to the majority staff of the Senate Finance Committee. She is a partner with McGuireWoods LLP and a senior advisor for federal government relations for McGuireWoods Consulting.