“The tax benefit provided $338 billion in deductions in 2015, making it the most widely claimed itemized deduction that year, according to the most recently available IRS statistics. Fully repealing it would raise $1.4 trillion in revenue over a decade, according to an estimate by Alex Brill of the conservative-leaning American Enterprise Institute.”
Hurricane Harvey hit Southeast Texas last month with tremendous winds and poured an overwhelming amount of rain over thousands of square miles of land. More than 185,000 homes have been damaged or destroyed in Texas, and property damage estimates start at $50 billion. More than 80 people lost their lives, and thousands of families will forever be affected by the storm’s devastation.
Last week, I had the privilege of being one of four witnesses invited to testify at the Senate Finance Committee’s wide-ranging hearing on reforms to the individual income tax. Sitting down the witness table from me was AEI visiting fellow Ramesh Ponnuru. Our testimonies approached tax reform from different vantage points. Ponnuru homed in on one tax policy — what he calls the “parent tax” — and made a clear case for the expansion of the child tax credit as a remedy. I gave a broader view of tax reform principles and the importance of broadening the tax base (that is, limiting deductions, exclusions, and credits).
“One of the things we heard yesterday is that there is pretty wide agreement among all lawmaker about the problem. There may not be agreement about the solution. That’s an underappreciated fact.”
The opportunity for fundamental and comprehensive tax reform is before this Committee for the first time in many decades. As every Member of this Committee well knows, the tax code has frequently and sometimes significantly changed over the last 30 years, but not since 1986 has it been truly reformed in a manner that sought to broaden the base – that is, eliminate special deductions, credits, and exclusions– while lowering statutory tax rates. As Senators Hatch, Wyden, Roberts, and Grassley know firsthand, that legislative process was arduous and sometimes controversial, but the 1986 Tax Reform Act did result in a simpler income tax code with a broader tax base and significantly lower statutory tax rates.
