The 114th Congress Should Reform Tax Policies Soon
April 10, 2015
While there are numerous major economic policy reforms that Congress should undertake in the 114th Congress, some reforms have a much better chance than others of being enacted immediately, says Heritage Foundation research fellow Daren Bakst.
Several tax reforms include:
- End the annual tax extenders debate. The tax extenders are a collection of more than 50 tax policies that expire regularly. Expiring provisions are bad policy. As such, Congress should make the sound policies in the tax extenders package permanent, allow all the other policies to expire permanently, and then reduce other taxes by the amount the expired tax policies raise, in order to avoid a tax hike.
- Make Section 179 expensing permanent at $1 million. The tax code requires businesses to deduct the cost of capital expenditures over many years. Because of the time value of money, this reduces the real value of their deduction, which raises the cost of capital.
- Amend Subchapter S to provide greater flexibility for S corporations. S corporations are small corporations that do not pay the corporate income tax. Instead, shareholders pay tax on their individual tax returns on their share of the corporation's profits. Congress should amend Subchapter S to permit S corporations to have more than one class of stock.
Congress can pass legislation this year that would make a significant difference in the lives of Americans. Despite the perception of partisan gridlock, broad support exists for many important domestic economic policy reforms. These policies are ambitious but achievable, and if adopted, would promote economic growth.
Source: Daren Bakst, "Achievable Economic Policy Reforms for Congress," Heritage Foundation, March 31, 2015.
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