Tags: Lew | business | tax | reform

Treasury's Lew Speaks on Tax Proposals

By    |   Thursday, 22 January 2015 07:59 AM

Treasury Secretary Jack Lew appeared at the Brookings Institution to talk about the state of the U.S. economy Jan. 21, the day after the president delivered the annual State of the Union address.

Lew characterized the president's proposals as intended to keep the recovery on track and to help the middle class share in its gains. He called the proposals a "roadmap" to make it easier for families to buy a home, for students to attend college, for workers to find good high-tech jobs, for working families to care for sick and aging family members and to defend and rebuild the nation's infrastructure. President Obama called for revamping the business tax system, to make the U.S. more attractive for companies that can create high-paying jobs. The program would be paid for in part by closing tax loopholes that benefit the wealthiest taxpayers.

Lew moved quickly away from the "roadmap" to the issue of reforming the business tax system "to promote long-term growth and broad-based prosperity." He lamented that it had been 30 years since the outdated tax system was reformed (he could have said 60 years), but his remarks were focused on business taxes, so he has essentially yielded the question of a broad overhaul.

The Secretary observed that the transition to a reformed system would create "one-time revenue," some of which could be spent on infrastructure repair and improvement. He found that a "bipartisan consensus" exists now, so that there is "a unique opportunity to get this done."

Zigging back to the economic picture, he contended that economists and the International Monetary Fund see good prospects for the above-trend GDP growth reported in the fourth quarter of 2014 to continue. (A listener would look forward to this assessment being challenged during the Q&A period, or for questioners at least to ask how much it depends on the Federal Reserve continuing or even expanding the accommodative monetary policy that it has promised to unwind.)

Lew said that other countries are looking to the U.S. as an example of how to design recovery policies, and, interestingly, he credited the prior administration as well as Congress and this administration for the favorable results he and other administration spokesmen celebrate.

Zagging back to the issue of business tax reform, Lew decried the wide disparity in effective tax rates of corporations and the prevalence of loopholes that incentivize perverse corporate strategies, and he singled out the disparity between taxes paid by the oil and gas industry and the retail and manufacturing sectors. He called for the one-time revenues to also be spent on one-time investments, so as not to upset the budget. (Hopefully a questioner would ask how this is consistent with the proposal of new middle-class entitlement programs.)

Lew listed the "five pillars" of a bipartisan tax proposal as: 1) lowering tax rates and closing wasteful loopholes; 2) building on the resurgence of manufacturing; 3) rooting out provisions that encourage companies to shift production overseas; 4) simplifying and reducing taxes for small businesses; and 5) making reform revenue-neutral in the short and long run.

He concluded by restating the administration's opposition to "dynamic scoring" of fiscal policy while insisting that the administration makes fiscal responsibility the highest test of policy.

During the Q&A, Lew explained that a proposed financial transaction fee would be applied to financial firms of $50 billion or more and designed in such a way as to target wholesale funding, which the Financial Stability Oversight Council, chaired by Lew, has identified as contributing to systemic risk.

(Archived video can be found here and the prepared remarks can be found here.)

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Treasury Secretary Jack Lew appeared at the Brookings Institution to talk about the state of the U.S. economy Jan. 21, the day after the president delivered the annual State of the Union address.
Lew, business, tax, reform
Thursday, 22 January 2015 07:59 AM
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