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What to Expect from Tax Reform
Thursday, September 28, 2017 6:35 AM

Catalyst Corporate Federal Credit Union

With health care reform moving off the congressional center stage, tax reform is on deck. But even though there is widespread support for tax reform in concept, real tax reform may be challenging, said a J.P. Morgan economist and presenter at next week’s Catalyst Corporate’s annual Economic Forum.

Jesse Edgerton, an economist at J.P. Morgan in New York, will share his insights on this topic next week as he presents “An Economic Outlook and Real News on Tax Reform” at Catalyst Corporate’s 40th annual Economic Forum in Las Colinas, Texas.

“Over the next few months, a lot of discussion likely will occur about procedural issues related to passing any sort of reform,” said Edgerton. “All that is beside the main point. The focus should be on whether the Senate can find 51 votes to pass an extensive tax reform plan. Will we be able to lower tax rates without increasing debt too much?”

What type of package does Edgerton think Washington will seek? “A fair amount of hope exists that we could potentially come together on some kind of broader tax reform package that could make tax code more efficient,” he said, noting that D.C. lawmakers are exploring options around a more comprehensive reform, rather than straight tax cuts.

However, he’s not optimistic this will happen. “To pull off that type of reform, you need a way to increase lost revenue,” he said.

For example, a border adjustment tax, eliminating the deductibility of interest for corporations, or tapping mortgage interest deductions for households are the types of measures Edgerton suggests are necessary to reshape the tax code without giving up revenue.

“Pulling off a broad tax reform package would require making deals across multiple groups. Everyone must end up happy enough to support the reform effort,” he added. “That’s pretty difficult to do.”

“In recent years,” he continued, “there’s been a lot of debate about reforming the corporate tax code. Many agree it would be good to make those reforms. It becomes difficult to move forward because of the tradeoff of who wins and who loses.”

With these obstacles, some analysts, including Edgerton, view the most likely path of tax reform as a straight tax cut. “It could be for personal taxes, corporate taxes, or both; and it will be paid for by borrowing more,” said Edgerton. “A straight tax cut preserves the current structure of the code with all its current complexities.”

Would a straight tax cut be similar to what the country saw in the early 2000s under President George W. Bush? “That’s a potential template,” said Edgerton. “Even if we’re not able to reform the tax code this time around, we shouldn’t give up on that goal. We can do much to improve the tax code, and a total reformation is an admirable goal for the future. Just because it may not happen this time around, doesn’t mean it won’t happen sometime in the future.”

To hear more from Edgerton and other thought leaders, attend Catalyst Corporate's Economic Forum Oct. 2-4. Walk-in registration is now available. For details, visit catalystcorp.org/r/forum.

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Catalyst Corporate Federal Credit Union is a five-star endorsed business partner of Credit Union Resources, Inc., a wholly owned subsidiary of the Cornerstone Credit Union League.

About Catalyst Corporate Federal Credit Union
Catalyst Corporate Federal Credit Union is a wholesale cooperative financial institution serving more than 1,400 member and client credit unions in all 50 states. Since 1975, Catalyst Corporate has been providing credit unions efficient and competitively priced core financial services, including payments and technology services, liquidity and member credit services and balance sheet management and investment services, as well as industry-leading back-office support. For more information, please visit catalystcorp.org.