His conclusion? Things don’t look so bad.
“Overall, TRA17 is not much worse than TRA86 or TRA14. It increases the deficit, but not by an impossible amount; it is distributionally skewed, but less so than is usually assumed; and its details are not terrible (on the international side they are a big improvement over prior law). There is one big problem, the pass through provisions, and we can only hope that as its horrible implications unfold it will be a prime candidate for repeal.”
Avi-Yonah’s optimism isn’t widely shared in academic circles. For example, he cites Edward Kleinbard‘s piece in The Hill, titled “Senators picked Americans’ pockets via degraded tax policy process.”
“The Tax Cuts and Jobs Act, this year’s Christmas present to the donor class, is an abomination. Its top-heavy distribution of cuts, its wasteful mistargeting of incentives, and its funding of permanent corporate tax cuts via tax hikes on millions of ordinary taxpayers have been widely publicized.
From the other direction, whatever virtues the bill might have are completely swamped by its trillion-dollar plus impact on government deficits.”
Avi-Yonah believes that the problems with TRA17 are overstated and can be fixed with future legislation. The biggest problem according to Avi-Yonah are the pass-through provisions, which he deems “totally unnecessary” and unworkable. (Or perhaps, an interesting tax planning opportunity.) However, Avi-Yonah is optimistic that the pass-through provisions will get repealed or changed relatively quickly. We’ll see.
Original article: Reuven S. Avi-Yonah, “How Terrible Is the New Tax Law? Reflections on TRA17” (January 2, 2018).
Photo: Jomar Thomas.