Conference Reveals Need for More Tax Reforms by 2025

On May 23rd, the Tax Foundation held a conference on Capitol Hill to discuss the legacy of the 2017 Tax Cuts and Jobs Act (TCJA) and the impending expiration of many of its provisions at the end of 2025. The event, available for viewing in its entirety, provided a comprehensive overview of the TCJA’s impacts and the need for further tax reforms.

Chairman Kevin Brady, a key architect of the TCJA and former Chairman of the House Ways and Means Committee, opened the conference. He highlighted the goals of the TCJA: improving competitiveness, making America a more attractive place for business, and fostering broad economic growth. Looking ahead, Brady emphasized the need to further simplify the tax code and maintain a competitive corporate tax rate to support economic growth.

A panel featuring Michelle Hanlon (MIT Sloan School of Business), George Callas (Arnold Ventures), and Katherine Monge (Capitol Tax Partners) addressed common misconceptions about the TCJA. They noted that despite the TCJA’s design to cut taxes for most people, it was often perceived as a tax increase due to its complex provisions and partisan politics.

The panel explained that the TCJA resulted from years of effort and discussion, with the final law involving complex trade-offs. They also touched on the debate over whether the TCJA would pay for itself, emphasizing that its primary aim was to cut taxes.

The next panel, focused on domestic corporate tax policy, included Jeff Hoopes (University of North Carolina Kenan-Flagler Business School), Bill Gale (Urban-Brookings Tax Policy Center), Loren Ponds (Miller & Chevalier Chartered), and Eric Zwick (University of Chicago Booth School of Business). They discussed the importance of a competitive corporate tax rate, noting that the TCJA lowered the U.S. corporate tax rate from 35% to 21%, making the investment climate more favorable.

The panel also highlighted the need for proper business tax base policies, such as expensing, which allows businesses to fully deduct investment costs. The TCJA temporarily increased expensing for equipment to 100% through bonus depreciation, but this provision is phasing out. The law also reversed on R&D expensing, requiring amortization after 2021.

Eric Zwick presented research showing a 20% increase in business investment in the first two years following the TCJA, with long-term benefits expected to continue accruing for up to 20 years.

The final panel on the TCJA’s international provisions featured Jim Hines (University of Michigan), Kim Clausing (UCLA School of Law), Scott Dyreng (Duke University), and Teri Wielenga (Gilead Sciences, retired). They discussed the TCJA’s impact on foreign income taxation, noting that prior to the TCJA, U.S. multinationals faced a complicated and uncompetitive tax system. The TCJA lowered the corporate tax rate and implemented a more standard exemption of foreign income, ending corporate inversions and encouraging profit repatriation.

To conclude the conference, key recommendations for approaching the TCJA’s expiring provisions were presented:

  1. Simplification: Reform the tax code to reduce complexity and ease compliance.
  2. Economic Growth: Ensure the tax code supports robust business investment and innovation.
  3. Fiscal Responsibility: Address the unsustainable federal budget trajectory by maintaining responsible tax policies.
  4. Consensus: Build broad support for stable, long-term tax reforms to reduce uncertainty and foster economic growth.

Additionally, fundamental tax reforms were suggested:

  • Provide permanent full expensing for all assets to boost investment.
  • Integrate corporate and individual tax codes to reduce double taxation.
  • Remove overlapping minimum taxes and redundant provisions for foreign income to simplify business taxes.
  • Implement universal savings accounts to improve financial security.

The conference underscored the importance of viewing 2025 as an opportunity for significant tax reforms to address ongoing deficiencies in the tax code.

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