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Tax Reform Isn’t Done, June 8
When it comes to reforming the federal tax code, there is still more work to be done. A number of major
provisions in the Tax Cuts and Jobs Act are scheduled to expire over the next eight years. Many of the expiring
provisions should instead be made permanent. At the same time, lawmakers should evaluate which portions of
the Tax Cuts and Jobs Act ought to be improved. More broadly, the Tax Cuts and Jobs Act did not address every
area of the federal tax code in need of reform. Specifically, lawmakers should provide greater cost recovery for
structures and reform the tax treatment of household saving.
1. Many provisions in TCJA are scheduled to expire
There are several scheduled tax changes over the next few years that would create new tax barriers to
business investment, including the phaseout of 100 percent expensing for equipment and machinery, as
well as the requirement that businesses deduct their research and development costs over five years.
There are also a number of individual tax changes that will expire in 2025, including across-the-board rate
cuts, the increased standard deduction, the new deduction for pass-through businesses, and new limits
on itemized deductions.
2. The TCJA did not significantly improve the ability of businesses to deduct their investments in long-life
One of the most significant distortions remaining in the federal tax code is the rule that businesses that
invest in structures (that is, buildings) are required to deduct the cost of these investments over very long
periods of time. There are a number of ways that lawmakers could increase cost recovery for structures
in the future, in order to lessen the bias against investing in buildings.
3. The federal tax code is not neutral between present consumption and future consumption
Currently, there are almost a dozen tax-advantaged savings accounts, including traditional and Roth IRAs,
401(k)s, HSAs, and 529s—each with different rules and restrictions. This is an extremely complicated