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Tax Reform May Not Need to Be Revenue Neutral, Hatch Says

Posted on May 8, 2017 by Asha Glover

Legislation to overhaul the tax code may not need to be revenue neutral if tax reform results in tax cuts that would jump-start the economy, Senate Finance Committee Chair Orrin G. Hatch, R-Utah, said May 4.

“I’m not so sure that it’s absolutely crucial that it be revenue neutral . . . if we can cut taxes in an appropriate way that actually, it would boom the economy and the economy would start moving forward,” Hatch said on Bloomberg Television. “I would be more concerned about how we can get the economy to move forward and grow than whether or not we meet the formal test of budget neutrality.”

However, House Ways and Means Committee Chair Kevin Brady, R-Texas, told reporters later in the day that his goal is still to have a revenue-neutral product. “We’re going for the greatest growth for the greatest number of years. That happens when tax reform is bold, when it is balanced within the budget counting on economic growth, and when it’s built to last, when it’s permanent,” he said. 

Hatch said he would like to try to reach the White House’s goal of getting the corporate tax rate down to 15 percent to spark growth. “If we could do that, a lot of these corporations would be coming back to America,” he said, but he added that even getting the rate down to 20 or 25 percent “would still be a sea change compared to the 35 percent that we currently have.”

But not all of the White House’s proposals would be easily achieved. For instance, when asked whether interest deductibility could be one provision targeted, Hatch said it could but that getting rid of it would be difficult because “people are so used to it and almost everybody is borrowing.” He said there were other things that lawmakers could look at that could be just as efficient, but didn’t specify what those provisions would be.

Hatch also said he would try to have an open mind about taxing carried interest at the same rate as ordinary income, but that he has a “rough time on that.”

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