by Michael Schuyler
September 30, 2013
One of the primary motivations for tax reform is a recognition that the U.S. income tax system is a serious drag on economic growth. Its anti-growth effects, which are inadvertent but powerful, hurt Americans’ productivity and incomes, reduce their ability to compete in an increasingly global marketplace, and diminish their future opportunities. Pruning back tax expenditures could—if done wisely—pay for spectacular reductions in income tax rates and fuel economic growth. Care must be taken, though, to assess the merits of each provision individually. Exchanging some provisions for lower rates would be pro-growth and would be a move that pays for itself. However, with a number of other tax features—notably those that affect the cost of capital—dropping the items in return for lower rates would slow growth and collect much less revenue than a conventional revenue estimate would predict.