Tuesday, March 6, 2018
Eric Solomon (Ernst & Young) presents Drivers and Effects of the 2017 Tax Act at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by Lilian Faulhaber and Itai Grinberg:
On December 22, 2017, the President signed “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (P.L. 115-97), hereinafter called the 2017 Tax Act (or the Act). The 2017 Tax Act made substantial changes to the Internal Revenue Code, particularly lowering the corporate tax rate and revising the international tax provisions. In the words of Mark Prater, Deputy Staff Director and Chief Tax Counsel for the Senate Finance Committee, three important factors in the development of this Act were policy, process and politics.
It is not yet known how the states will react to the 2017 Tax Act. States that piggyback on the federal system will need to decide what to do. The Act has many glitches and ambiguities. The chances of technical corrections or other correcting legislation are slim in the near future. Responsibility has been passed to Treasury’s Office of Tax Policy and the IRS to provide administrative guidance to clarify and interpret the Act. The IRS will have to administer the new law with limited resources.
The Act is likely to increase deficits. How will our government address this? Spending reform, such as reducing entitlement programs (e.g., Medicare, Medicaid and Social Security)? Are we done with tax reform? At some point in the future, will we need new taxes, such as a value-added tax or a carbon tax?