Can It Happen Here Kirk J Stark Barrall Family Professor of Tax Law and Policy UCLA School of Law January 2017 Structure of Remarks The New Political Landscape Polling Data 2015 Pew popular opinion on US tax system and tax reform ID: 603526
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Tax Reform Act of 2017Can It Happen Here?
Kirk J. Stark
Barrall Family Professor of Tax Law and Policy
UCLA School of Law
January 2017Slide2
Structure of Remarks
The New Political Landscape
Polling Data
2015 (Pew): popular opinion on U.S. tax system and tax reform
2017 (Pew): popular opinion on political influence in Trump era
2017 (Harvard) : popular opinion on tax reform in Trump era
Specific Tax Reform Proposals from:
Trump campaign proposals (Revised September 2016)
House GOP (Ryan/Brady June 2016 “Blueprint”)
Senate GOP (Hatch)
Projections
about
tax reform in 2017 or beyond.Slide3
Possible Executive-Legislative Outcomes, (Very Loosely) Ranked by Likelihood
DEM President, DEM Senate, GOP House
DEM President, GOP Senate, GOP House
GOP President, DEM Senate, GOP House
GOP President, GOP Senate, GOP House
Notesthe most likely outcomes feature divided governmentfilibuster-proof Senate control very unlikely for either partyclose 2016 margins will likely accelerate the political salience of future elections (2018, 2020, etc…)
February 29, 2016Slide4
Thumbs Up on Tax Reform?Slide5
2015Slide6Slide7Slide8Slide9Slide10Slide11
2017Slide12Slide13Slide14Slide15
2017Slide16Slide17Slide18Slide19Slide20
State of Play // Current ProposalsSlide21
House GOP Proposed Individual Income TaxSlide22Slide23
Current v. Trump Proposed Tax RatesSlide24
Business Tax ProposalsSlide25
Business Tax ProposalsSlide26
Intellectual History of House GOP’s Corporate Cash-Flow TaxStandard credit-invoice VAT
Tax each firm on receipts from other firms
Credit for VAT paid on inputs
Subtraction-Method VAT
Tax each firm on total receipts minus inputs
No deduction for wagesHall-Rabushka “Flat Tax” // David Bradford’s “X Tax”“Modified” Subtraction-method VAT (allow deduction for wages)Paired with free-standing wage tax w/ household returns2005 Growth and Investment Tax PlanVariation of “flat”/ X-tax model“destination-based” w/ border tax adjustmentsBlueprint Destination-Based Corporate Cash Flow TaxSlide27
Key Features of House GOP’s Destination-Based Corporate Cash-Flow Tax
Replacement for corporate income tax
Only applies to corporations, not pass-through entities
Single rate – presently advertised at 20%
Replace depreciation with immediate expensing
Retain deduction for wages(can be understood as a 20% “subsidy” for payroll, relative to VAT)“destination-based”No deduction for importsExport revenue not includedNote: major legal questions here regarding WTO rules on permissibility of border adjustments for “direct” taxesSlide28Slide29Slide30Slide31Slide32Slide33Slide34Slide35
Will top individual tax rate be reduced in 2017?Slide36
Will top corporate tax rate be reduced in 2017?Slide37
Will carried interest be taxed as ordinary income in 2017?