Devin Nunes' Business Tax Plan Now Flows in GOP Mainstream
By RICHARD RUBIN
Jan 12, 2016 7:31 pm ET
When Rep. Devin Nunes of California started promoting his ABC (that’s American Business Competitiveness) tax plan in 2012, it looked implausibly far from the Republican Party’s consensus.
Now, as he introduces it as a bill for the first time on Wednesday, Mr. Nunes’s plan is squarely in the GOP mainstream.
Mr. Nunes, a senior Republican on the Ways and Means Committee, wants to lower the tax rate on business income to 25%, instead of the 35% corporate tax rate or the 39.6% top rate on business income reported on individual tax returns. He would let businesses write off their capital investments immediately and repeal all business tax credits and the deduction for business borrowing costs.
“What people are realizing is that tinkering with the tax code won’t necessarily grow the economy,” he said in an interview on Tuesday. At the same time, he said, “by not touching the personal side of the code, you make the politics of this a lot easier.”
Mr. Nunes’s plan, essentially a tax on business cash flow, would also lighten the tax burden on U.S. companies’ foreign income, repeal the corporate alternative minimum tax and eliminate other targeted tax breaks. The plan’s removal of the interest deduction could be a big problem for the financial services industry, Martin Sullivan of Tax Analysts wrote last year.
At a time when other Republicans were proposing longer depreciation schedules and exploring a revenue-neutral overhaul of the tax system, Mr. Nunes’s shift toward a business cash-flow tax was an outlier.
But in 2016, several of the Republican presidential candidates, namely Marco Rubio, have embraced elements of his plan on business taxes. Most of them favor immediate writeoffs of capital costs and don’t worry much about the fiscal effects of tax cuts exceeding $1 trillion over a decade. Mr. Nunes’s plan would cost the government $1.6 trillion in foregone revenue over a decade, according to a Tax Foundation estimate that doesn’t account for any economic growth. Under a so-called dynamic estimate, it would raise revenue.
Mr. Nunes said he’s welcome ideas from experts on how the bill could work better and is trying to position his ideas to be taken up by Congress and a Republican president in 2017.