Making many of the tax extenders permanent was a prelude to tax reform, because it will eliminate the annual tax debates in Congress that have plagued the institution in recent years. That’s the view expressed by the new Ways and Means Committee Chair Kevin Brady (R-Texas), who took over the chairmanship in November when Paul Ryan became Speaker.
Corporate tax reform that is sensitive to international considerations is one area that may get consideration in 2016. Republicans generally believe that reducing the corporate tax rate is the best way to head off corporate inversions, in which companies move their headquarters out of the U.S. largely for tax purposes. Although earlier discussions have targeted a 25% corporate tax rate, “I am convinced that we have to be at 20% or below to keep us competitive for the longer run,” Brady told Tax Analysts in a December interview.
The difficult political question is whether tax reform should be revenue neutral, as Republicans have advocated, or whether it should raise new revenue, the Democratic position. “I don’t want tax reform to bail out Washington spending problems,” said Brady. “I want it to grow the economy.”
A more pessimistic view of the potential for tax reform in 2016 was expressed by George Callas, who is the senior tax counsel to Speaker Ryan. There just won’t be time to work through much significant tax legislation before everyone breaks for the November elections. Tax reform ideas are likely to be grist in the presidential race, and may get a thorough airing through the campaign. However, Callas conceded that there is political pressure to “do something” about corporate inversions.
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