Revenue Neutral Agreement Definition

The tax reform standard, which is income-neutral, is a useful fiscal objective that imposes some fiscal discipline. However, decisive details remain on how to measure the neutrality of turnover. We hope that Congress will choose to abide by long-established budget assessment rules in order to impose tax neutrality against existing legislation. They should not use current policies to lower the bar, claim deficit neutrality and conceal an increase in the deficit. What is the income-neutral tax rate (“RNTR”) and why does it exist? [13] According to the Ministry of Finance and OMB “estimate the [tax expenditures]… For the following reasons, it is not necessarily equivalent to the increase in federal revenues (or the change in the budget balance) that would result from the repeal of these particular provisions. First, the removal of tax expenditures can have incentive effects that change economic behaviour…. Second, even in the absence of an incentive, tax expenditures are interdependent. See Office of Management and Budget, Analytical Perspectives: Budget of the U.S. Government, Fiscal Year 2014 (2013), at Table 16-2, www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/spec.pdf. According to the JCT, “The calculation of tax expenditures is not the same as an estimate of revenue for the cancellation of the tax expenditure provision for three reasons.

First, contrary to revenue estimates, tax expenditure calculations do not take into account the effects of expected behavioural changes in response to the cancellation of a tax expenditure provision. second… [b] Given that the tax expenditure analysis focuses on tax liabilities as opposed to federal tax revenues, there is no doubt as to the short-term date of tax payments. Third, some income exclusion tax provisions also apply to the FICA tax base [and other federal taxes] and the cancellation of the income tax provision would automatically increase FicA`s tax revenues and income tax revenues. See Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2012-2017, JCS-1-13 (Feb. 1, 2013), at 24, www.jct.gov/publications.html?func=startdown&id=4504. The interaction with the FICA tax is most often with respect to the individual page of the tax code, not the business side that is modelled here. Even with a 25% tax cut, GDP would decline beyond the increase.

Therefore, revenue offsets would create many winners and losers. As a general rule, capital-intensive sectors are expected to benefit the most from a reduction in the corporate tax rate.