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1 Michael Schuyler, The Growth Effects of the Nunes Plan to Reform Business Taxation 1 (2015)

handle is hein.taxfoundation/genunpbt0001 and id is 1 raw text is: TAXS FOUNDATION FISCAL FACT Feb. 2015 No. 454 The Growth Effects of the Nunes Plan to Reform Business Taxation By Michael Schuyler, PhD Senior Fellow Executive Summary Representative Devin Nunes (R-CA) seeks to reform how the federal government taxes business income. Major elements of his plan are: * Cutting the corporate income tax to 25 percent; * Limiting the top tax rate on non-corporate business income to 25 percent; * Allowing businesses to deduct investment costs when they occur (full expensing); * Eliminating most business deductions and credits; * Moving to a territorial tax system like most other developed nations; * No longer letting nonfinancial businesses deduct interest costs but no longer taxing them on interest receipts; and * Applying the same tax-rate limitation to individuals' interest income as to their dividend income. Tax Foundation's economists used the Taxes and Growth Model (TAG) to evaluate the economic and budget implications of the Nunes plan. We did not model the proposal's transition provisions. Key Findings * According to the Taxes and Growth Model, the Nunes tax reform plan would increase the size of the economy by 6.8 percent over the long run. * The plan would increase the level of investment by 20 percent, lift wages by 5.7 percent, and create 1.2 million full-time equivalent jobs. * On a dynamic basis, the plan would increase federal revenue by $96 billion in the long run due to increased economic growth. * The two main drivers of economic growth in the plan are the full expensing of capital investment and the lower tax rate on business income, both of which significantly reduce the tax code's bias against saving and investment.

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