Two plans to change the US tax system have come from Republicans. Republican members of Congress had authored the first plan and the White House the second plan. The Congress plan is named “Better Way”. It is being vociferously promoted by the House Speaker Paul Ryan. Another champion promoter of Better Way is the chairperson of House Ways and Means Committee, Kevin Brady. The tax plan crafted by the White House envisions a huge tax cut. This tax slash would primarily benefit prosperous Americans only.
The two plans are much different but have one common theme: they plan to reform both business and individual parts of American tax system. Both plans envisage reduction the tax brackets number from present day seven to three. The top rate will also be lowered. Both Congress and White House plans will repeal the estate tax, the Obama imposed tax levied on investment income and alternative minimum tax. Standard deduction will be expanded on both plans. Such reforms would lead to a rise of the national debt by about $3 trillion to $4 trillion spanning the subsequent 10 years.
Differences between two tax plans
Although these two plans provide similar rate cuts when it comes to individuals, they diverge on business aspects. When it comes to Ryan-Brady Congress plan, the present corporate income tax will be converted into a tax imposed on border adjusted cash flow. This tax constitutes a burden on consumption and not on income. This plan has created many divisions among businesses and lawmakers. US exporters like GE fully support this plan. Importers like Walmart are totally against such a proposal.
When the economic fallout of both the plans were considered, it is clearly seen that the proposal created by the White House will tremendously increase national debt. The result will be stunted economic growth or none at all. The Congress proposed Better Way is a much more better plan. Even then, the proposal crafted by Ryan will also increase American national debt. It is expected that this new proposal, if accepted, will disrupt trade around the world, benefit a few US companies while harming others. It may also lead to creating financial problem outside United States by shock increase of US dollar value. This may result in costly and pervasive uncertainty. However, for all its faults, the Better Way plan is step in right direction when it comes to tax reform.