On May 23rd, the Tax Foundation hosted a conference 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 conference, recorded and available for viewing, offered a wealth of insights into the TCJA’s design, impact, and the need for further tax reforms. [source]
Chairman Kevin Brady, a key architect of the TCJA, highlighted the initial intent behind the Act: to reform the tax code, improve competitiveness, make America more attractive for business, and stimulate broad economic growth. However, he also emphasized the need for further tax code reform to reduce complexity and support economic growth, cautioning against raising the corporate tax rate to uncompetitive levels.
A panel discussion featuring experts from various institutions debunked several myths and misconceptions surrounding the TCJA. Despite being designed to cut taxes for most income brackets, the TCJA was often perceived as a tax increase due to partisan politics and the complexity of the tax code. The panel also highlighted that the TCJA was not an overnight creation but the result of years of effort to resolve complex trade-offs.
Another panel focused on domestic corporate tax policy, discussing the importance of a competitive corporate tax rate. Prior to the TCJA, the U.S. had the highest statutory corporate tax rate in the developed world. The TCJA reduced the federal corporate tax rate to 21 percent, significantly improving the U.S.’s investment climate. However, the panelists also noted the importance of getting the business tax base right so that businesses can fully deduct the cost of investment.
Despite its benefits, the TCJA also had its drawbacks. Much of the law was made temporary, reducing long-term economic benefits. In some ways, it further complicated the tax code with special deductions for some businesses. The final panel covered the TCJA’s international provisions, discussing the uncompetitive tax treatment of foreign income prior to the TCJA and how the Act ended corporate inversions completely.
In conclusion, while the TCJA has had significant impacts, there is a need for further tax reforms. Lawmakers should aim for simplification, economic growth, fiscal responsibility, and consensus. The tax code should not penalize business investments, which are crucial for sustainable economic growth. At the same time, fiscal responsibility is paramount, as trillion-dollar deficits cannot continue indefinitely. The next round of tax reforms should consider these factors to ensure a more sustainable and equitable tax system.