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Unity Will Deliver Tax Cuts

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Getting tax reform passed Congress requires Republican unity. To avoid division, they should focus on corporate income tax reform.

Corporate income taxes are damaging. The U.S.’s 40% (combined state and federal) rate is extreme vs. 25% (average) for OECD countries. Exemptions distort the economy; partial expensing discourages productive investment. The aim should be to cut the rate permanently as low as possible and introduce full expensing.

The reconciliation process prohibits increasing deficits beyond a ten-year term, making President Trump’s 15% target ambitious. Eliminating exemptions to enable a substantial rate cut would bring higher investment, productivity and wages.

Ryan Bourne, Cato Institute

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