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Lew Warns Against US Deficit-Increasing Tax Reform

by Scott Hamilton, Tax-News.com, Washington

26 December 2016


After reporting that the Treasury Department has "made a lot of progress on business tax reform" during his tenure as Treasury Secretary, Jack Lew warned that the substantial corporate tax cuts planned by the incoming Administration could cause too great an increase in the US fiscal deficit.

During an interview on the Fox Business Network, he stated that "we need to get rid of the loopholes and the deductions, and we need to lower the rates. But what we can't do is spend a lot of money having a tax cut that loses revenue because that's just going to shift the burden somewhere else."

Repeating his recommendation for revenue-neutral reform, Lew was concerned that "the environment in Washington won't be focused so much on the fiscal gap for the next few months, but it's really important that we keep our eye on that, because if you open a big fiscal gap, the only way to close it is to cut spending or to raise taxes."

"If you cut spending, you're going to be looking at things like Social Security and Medicare and Medicaid and food assistance programs," he added. "And that's a real problem because that serves important needs in the lives of working families."

Lew also commented that to get US multinational companies to repatriate the funds they currently retain abroad, there will need to be a mandatory tax. "If it's voluntary," he stated, "we've seen in the past that companies will only bring it back at the moment when they most benefit, not at the moment when it lends additional revenue to the overall system."

Finally, Lew believed that achieving individual income tax reform would be "more complicated. … There is no revenue-neutral way to cut individual taxes unless you so reduce deductions on things like charitable contributions and mortgage interest deductions that it either becomes a policy problem or a political problem."

TAGS: environment | tax | business | interest | food | United States | tax reform | individual income tax

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