Tax reform could breathe life into the economy—if the recovery doesn't kill tax reform first.
A strengthening rebound in the U.S. would accelerate gains in employment and government tax collections, taking pressure off Congress to use tax reform to generate more revenue for deficit reduction, Bloomberg BNA reported. At the same time, backers of a tax-code rewrite have seized on its potential to speed the recovery, and an early economic rejuvenation may undermine their case.
"A grim economy and large deficits pushes lawmakers toward tax reform, because the need is obvious," said Alex Brill, a research fellow at the American Enterprise Institute, a non-profit group that advocates free markets. "But, in that situation there is added pressure for more revenue and that also makes things more difficult. If the economy improves and the near-term deficit outlook improves as well, then the reverse is true: less pressure on raising taxes but less obvious need to act at all."
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