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Home>UPDATE: How to separate fact from fiction in tax reform

UPDATE: How to separate fact from fiction in tax reform

UPDATE: How to separate fact from fiction in tax reform


By Caroline Baum, MarketWatch

Lower rates could come easier if tax loopholes and exemptions were eliminated

What does it say when something has universal support among businesses and households, advocates on both sides of the aisle, and, if properly executed, the potential to stimulate economic growth, yet can't get off the ground?

Tax reform is complicated. The last real reform was 31 years ago, when Ronald Reagan was president. The Tax Reform Act of 1986 simplified the tax code, lowered rates, broadened the base, and eliminated many tax shelters. It has been a one-way ride in the other direction, with the exception of income tax rates, ever since.

With the GOP's latest effort on health care dead, Republicans are planning to unveil their tax reform plan this week.

Some of the details have been leaked (https://www.washingtonpost.com/news/wonk/wp/2017/09/24/gop-leaders-circulating-plan-that-could-end-as-massive-tax-cut-for-the-wealthy/?tid=a_inl&utm_term=.183c309e3159)already. The plan would lower the top marginal tax rate for individuals from 39.6% to 35% and collapse seven tax brackets to three. The corporate tax rate would be slashed to 20% from the current 35%, while other businesses would pay a pass-through rate of 25% compared with the maximum 39.6% individual tax rate they pay currently.

Last week, Senate Republicans agreed to a budget outline (https://www.wsj.com/article_email/senate-republicans-reach-tentative-deal-on-budget-1505842102-lMyQjAxMTE3ODIwNjEyODY1Wj/)allowing for $1.5 trillion of tax cuts over 10 years. (The Senate blueprint has to be reconciled with the House's proposed $200 billion of tax cuts.) The idea of a deficit-neutral tax cut seems to have died on the vine.

As you hear claims about the Trump administration's tax reform plan over the next few weeks, here are a few pointers to keep in mind.

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