Tax Reform 2.0 Framework

Tax|Tax Reform

By Carrie Urey

The House Ways and Means Committee (the “Committee”) released a brief outline of its tax reform plan titled House GOP Listening Session Framework: Tax Reform 2.0 (the “framework”) on July 24, 2018.  House Republicans hope this long-awaited tax reform 2.0 framework, if implemented, would solidify the Tax Cuts and Jobs Act (the “TCJA”) reform by helping to create jobs in the United States, raise wages, and expand the economy. The framework would make permanent the TCJA tax changes and institute other reforms to benefit individuals and small businesses. The Committee notes that the framework is designed to build on the growing successes of the TCJA in three main ways:

Provide certainty for Americans by making permanent the individual income tax rate and deduction changes scheduled to expire in 2025: Both the Committee and the Tax Foundation, an independent, nonpartisan think tank specializing in tax policy, estimate that this would create 1.5 million new jobs, increase wages by 9%, and increase GDP by 2.2%.  The Tax Foundation also notes that annual federal revenues would decline by $112 billion dynamically. 

Promote family-friendly savings plans: Various sources estimate that  50% of working-age adults say they do not expect to have enough savings to live comfortably in retirement. Additionally, more than one in three workers do not have access to a retirement plan through their employer. Tax Reform 2.0 contains a range of proposals to help families start saving earlier and save more throughout their lives. The framework suggests that the retirement objectives can be achieved through USA (Universal Savings Accounts, which offer a flexible savings tool for families), expanded Section 529 Plans (could be used to pay for apprenticeship fees to learn a trade, pay off student debt, or cover the cost of home schooling), and through New Baby savings accounts (paradoxically), which would allow families access to retirement accounts penalty-free when having a new child, though allowing for future replenishment. These instruments are not described in much detail, but are part of the very high-level outline.

Improve start-up business innovation: While it’s unclear what provisions the House may consider, House leaders have promised to remove the tax code’s barriers to entrepreneurship, while also helping businesses to write off more of their initial start-up costs.

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