Pub. 7 2017-2018 Issue 3

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S November • December 2017 7 Tax Reform: A Hard Job Worth Doing N othing in Washington that is worth doing is easy, and tax re- form is no exception. There is no doubt that our tax code needs a rewrite. As Congress’ Joint Com- mittee on Taxation points out, since our last overhaul in 1986, our economy has nearlydoubled insize, and the internet and globalizationhave fundamentally changed the way we do business. Today’s tax code fails to recognize these changes, puts us at a global com- petitive disadvantage (the combined state and federal U.S. corporate tax rate ofmore than 39 percent is two and three times higher than that of “competing” countries) and ultimately hinders job and economic growth. The good news is that leaders in the House, Senate andWhite House agree on the need for tax reform and are commit- ted to its enactment. While that creates a solid foundation for this important effort, we all know it will take fortitude and persistence to change a tax code that now spans 74,000 pages. ABA is strongly in favor of tax reform that strengthens economic growth and creates jobs. Astronger economywouldbe good for the country, our members, and their customers. We have made ourselves a resource to the lawmakers and staffwho are at the center of this enormous under- taking, providing analysis and expertise. We also are encouraging bankers to raise this topic in meetings with their elected representatives. Of course, like others, we have strong opinions about specific provisions, like the deductibility of interest and the tax-fa- vored status of bank competitors. But we also know that economic growth—which tax reformis intended to spur—is priority number one for our industry, and that any package put forward must be evaluated as a whole, based on its net impact on the economy, banks and bank customers. That is why we developed a set of core principles for tax reform that will serve as the basis for our comprehensive analysis of any package that emerges from the deliberations. Those principles, which are available in full on aba.com , urge policy- makers to: • Lower rates for all businesses sub- stantially — 15 to 20 percent has been proposed — to boost growth and allow BY ROB NICHOLS, PRESIDENT AND CEO AMERICAN BANKERS ASSOCIATION U.S. businesses to be competitive in the global market • Broaden the base and simplify the tax code to level the playing field • Specifically eliminate favored tax treat- ment enjoyed by credit unions and the Farm Credit System • Consider carefully the effects of any po- tential effort to limit the deductibility of interest, which could adversely impact economic growth. (The extent of tax rate reductionswill beakey factor inassessing the broader impact of any changes to the deductibility of interest.) • Avoid industry-specific taxes, which would be punitive, unfair and slow eco- nomic growth • Provide adequate transition time for the market and balance sheets to adjust to the new system ABA developed these principles through an internal tax reform working group that has coordinated closely with ABA’s banker-ledTaxationAdministrative Committee and solicited feedback from bankers in various forums. We have high- lighted the principles in communications toCapitolHill, informingmembers thatwe will strongly support tax reformefforts that align with these principles. Our goal is to encourage a smart ap- proach to comprehensive tax reform that can help America’s communities thrive. As a veteran of the Treasury Depart- ment in the early 2000s when tax cuts were enacted, I know this undertaking is hard — I have the bruises to prove it. But that doesn’t mean it can’t be done. It can, and we should do everything in our power to make it happen.  E-mail Rob Nichols at nichols@aba.com