This blog post is part of a series dedicated to analyzing the impact of the Tax Cuts and Jobs Act. Click here to see all of the blogs in the #TCJANowWhat series.
The Tax Cuts and Jobs Act (TCJA) was marketed as once-in-a-generation tax reform that would unlock growth, boost investment in the US, and ultimately reduce deficits because of increased tax revenue.
The tax bill did accomplish a number of desirable things. It brought down the corporate rate (though by more than necessary), which was too high and was hurting our competitiveness. It brought our international tax system more in line with other developed nations and hopefully reversed the troubling trend of corporate inversions. And the reforms to the state and local tax deduction and home mortgage interest deduction were some of the most sensible and courageous tax changes we have seen in quite some time.
However, the shortcomings well outweigh the benefits. The pass-through provisions are a confusing hodgepodge that add more inequities and complexities to the code. The many expiring provisions add new uncertainties rather than increasing overall certainty, which was one of the driving forces behind tax reform. The lost revenues from the bill will add trillions to the national debt, at a time we should be bringing the debt trajectory down.
Policy-wise, this is the story of fiscal damage and a missed opportunity. But what we have seen since the passage of the tax bill is that though the fiscal damage is significant, the political economy damage may be just as large.