WASHINGTON, DC – With the House Committee on Ways and Means and the Senate Committee on Finance developing comprehensive tax reform proposals, U.S. Sens. Sherrod Brown (D-OH), Bob Casey (D-PA), Debbie Stabenow (D-MI), and Ron Wyden (D-OR) sent a letter to the Joint Committee on Taxation (JCT), a nonpartisan committee that works on tax legislation. The senators requested a sector-by-sector analysis of any comprehensive tax reform proposal to ensure that the primary goal of tax reform – prioritizing new domestic investments and job creation – are achieved. 

“Whether it’s steel in Cleveland, Jeeps in Toledo, natural gas in Cambridge or advanced manufacturing in Columbus, Ohio leads the way in domestic innovation and manufacturing,” Brown said. “As any proposal moves forward on tax reform, we must consider what changes will mean to industries key to Ohio’s economic recovery and job growth.”

With continued domestic investment key to rebuilding and broadening our economy, Sens. Brown, Casey, Stabenow, and Wyden took the proactive step of engaging JCT given the potential effects of major changes to the tax code and the need to proceed with transparency and caution.

Full text of the senators’ letter to JCT chief of staff Thomas Barthold, follows:

Thomas Barthold

Chief of Staff

Joint Committee on Taxation

1625 Longworth House Office Building

Washington, DC  20515

 

Dear Tom:

The House Committee on Ways and Means and the Senate Committee on Finance are developing comprehensive tax reform proposals.  The proposals could have far-reaching impacts throughout the U.S. economy. A thorough understanding of those impacts will be critical to both Committees’ consideration of any tax reform proposal.  Therefore, we write to ensure that the Joint Committee on Taxation (JCT) staff is prepared to provide analysis of the impact of the tax reform proposals, as they emerge, on various sectors of the economy and more broadly on incentives for domestic investment.  We intend to request such a sectoral analysis as soon as a proposal is released.

Incentives for domestic investment are vital to domestic job creation.  Many of these provisions have been essential to the creation of good-paying jobs, including domestic manufacturing jobs, which have grown the U.S. economy and the middle class.  We believe that if tax reform eliminates these important tax provisions, it could adversely affect sectors of the economy that demand new domestic capital investment and that create and support good-paying jobs. 

Many tax reform proposals aim to eliminate or phase out specific tax expenditures in order to finance lower tax rates, generally.  These tax provisions serve specific policy goals, notably the promotion of manufacturing and capital investment in the United States.  If tax reform eliminates these provisions, the net effect could be to weaken incentives for manufacturing and capital investment, increasing effective tax rates even with lower nominal tax rates. 

An analysis by economist Martin Sullivan, published in Tax Notes, illustrated that a tax reform that eliminates three key domestic investment incentives – accelerated depreciation, the domestic production activities deduction, and the R&D credit – would have sharply divergent impacts on different sectors of the economy.  Domestic manufacturers, for example, would pay higher effective rates because the loss of incentives outweighs the tax benefit from lower rates.

The tax-writing committees are also considering major changes to the international tax system. International tax reform will also have important ramifications for many sectors of the economy and for domestic investment.

We believe that domestic investment is critical to creating good jobs in the United States and enabling broad-based economic growth, and we will want to gauge the impact of any tax reform proposal on capital-intensive sectors such as manufacturing and other key sectors of the economy.

It would be premature to speculate what specific provisions might be eliminated in the tax reform proposals that are being developed in the tax-writing Committees.  Detailed analysis of the provisions, including, but not limited to, sector-by-sector analysis in changes to effective tax rates, will be crucially important in both Committees’ consideration of the proposals as we move forward.  Given the importance of this analysis from the JCT, we are writing now to ensure that you and your staff are prepared to provide such analysis promptly upon release of the Committees’ tax reform proposals. 

We look forward to working with you on the continued examination of these and other issues as they develop in the tax reform process.

 

Sincerely,

SHERROD BROWN                                     ROBERT P. CASEY, JR.

DEBBIE STABNOW                                                RON WYDEN

 

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