Finding the Good in the Republican Tax Plan

Fiercely partisan reactions are overshadowing the accomplishments of the Republican tax proposal – as well as its misguided aspects. In reality, the plan is a mixed bag that has some good, bad and ugly parts. Here’s an early take on which reforms belong in what category.

1. The dramatic changes in the corporate tax are well designed. Specifically, the combination of the lower rate, the switch to territoriality, the temporary expensing of capital investment, and the repeal of the domestic production deduction simplifies the corporate system considerably and brings the corporate tax system in line with global realities. After many years of pushing on a string with monetary policy, these changes will serve as an important stimulus to the economy and will accrue to workers, though not nearly as much as claimed. This accomplishment is non-trivial and is the best part of the plan. A phase-in of the corporate rate reduction would have been preferred as the economic effects would be similar and the windfall to previous investments would have been limited.