Tax Reform Plans: New at Reason

Although far from true libertarian tax reform, there are elements of the House and Senate plans worth cheering, Veronique de Rugy writes.

The House version goes after a large number of tax exemptions, breaks, credits and deductions that make our code so complicated and unfair. It takes some significant steps to reduce the mortgage interest deduction. It also gets rid of most—with the exception of a $10,000 deduction—of the state and local tax deduction (SALT). Pretty impressive moves considering ending tax deductions is usually where tax reform goes to die.

The House plan doubles the standard deduction creating further simplification as dramatically fewer taxpayers will have to itemize their taxes.

The Senate plan also doubles the standard deduction (an estimated 90 percent of filers making under $200K would now claim the standard deduction). It gets rid of SALT entirely, but is more timid on the mortgage interest deduction. Moreover, it preserves many of the tax breaks with which the House dispenses. And rather than making the tax changes permanent, it includes a sunset date of 2025 reverting the standard deduction, the estate tax, the child tax credit, SALT, the pass-through deduction, and individual tax rates back to 2017 levels. While these changes over the House bill makes it more politically palatable, it means that simplification takes a back seat.

View this article.