July 31, 2014

Seeking a Better Tax Code -- and a Better Economy

  • The nation's fiscal future depends on the balance between the spending in the federal budget and the revenues flowing into the treasury. Tax policy...

At a forum last week in New York, business executives and former federal officials offered their views on how best to reform the tax code in ways that could promote economic growth as well as put the federal budget on a more sustainable path.

The forum was part of the Strengthening of America -- Our Children's Future initiative. The first part of the program featured Martin Feldstein, former chairman of the Council of Economic Advisers and a Romney adviser, and Lawrence Summers, former Treasury secretary and an Obama adviser.

Diane Lim Rogers, chief economist for The Concord Coalition, said Feldstein and Summers made it clear that in thinking about pro-growth tax reform, “there is a lot of common ground between Republican economists and Democratic economists.” This included, for example, support for broadening the tax base and eliminating tax expenditures that are considered inefficient or unfair.

But Rogers writes that she also heard “some remaining sources of disagreement between Feldstein and Summers, which are probably indicative of where ‘stumbling blocks’ to bipartisan tax reform remain.” For example, she says Feldstein “seems to favor continued low or even lower effective tax rates on capital income” while Summers “seems to favor reducing or eliminating the current preferential rates on capital gains and dividends.”

The second panel at the forum Thursday featured David Cote, chairman and CEO of Honeywell; Alfred West, CEO of SEI and chair of the American Business Conference, and Navin Thukkaram, COO of Qwiki, Inc.

Cote, who served as a member of the Simpson-Bowles fiscal commission, stressed the need for a credible and bipartisan plan to address the debt problem. This, he said, would reduce uncertainty in the business community, making businesses more willing to hire workers and expand production.

West said any program to reduce the debt must start with economic growth, and suggested that nothing would have a more positive effect on growth than embracing a debt reduction plan and sticking to it.

Thukkaram said Americans have been good at creating fiscally sustainable enterprises but that the government has fallen short. He urged policymakers to take a number of specific steps that would make the tax code more predictable and conducive to encouraging investment in small businesses.