Page 697

time for any purpose. This would allow the vast majority of American families to save and invest without facing a punitive double layer of taxation.

Entrepreneurship. To encourage entrepreneurship, the business loss limitation should be increased to at least $500,000. Businesses should also be allowed to fully carry forward net operating losses. Extra layers of taxes on investment and capital should also be eliminated or reduced. The net investment income surtax and the base erosion anti-abuse tax should be eliminated. The estate and gift tax should be reduced to no higher than 20 percent, and the 2017 tax bill’s temporary increase in the exemption amount from $5.5 million to $12.9 million (adjusted for inflation) should be made permanent.”! The tax on global intangible low-taxed income should be reduced to no higher than 12.5 percent, with the 20 percent haircut on related foreign tax credits reduced or eliminated.”

All non-business tax deductions and exemptions that were temporarily suspended by the 2017 tax bill should be permanently repealed, including the bicycle commuting expense exclusion, non-military moving expense deductions, and the miscellaneous itemized deductions.’ The individual state and local tax deduction, which was temporarily capped at $10,000, should be fully repealed. Deductions related to educational expenses should be repealed. Special business tax preferences, such as a special deduction for energy-efficient commercial building properties, should be eliminated.

Wages vs. Benefits. The current tax code has a strong bias that incentivizes businesses to offer employees more generous benefits and lower wages. This limits the freedom of workers and their families to spend their compensation as they see fit—and it can trap workers in their current jobs due to the jobs’ benefit packages. Wage income is taxed under the individual income tax and under the payroll tax. However, most forms of non-wage benefits are wholly exempt from both of these taxes.

To reduce this tax bias against wages (as opposed to employee benefits), the next Administration should set a meaningful cap (no higher than $12,000 per year per full-time equivalent employee—and preferably lower) on untaxed benefits that employers can claim as deductions. Employee benefit expenses other than tax-deferred retirement account contributions should count toward the limitation, whether offered to specific employees or whether the costs relate to a shared benefit like building gym facilities for employees.?> Tax-deferred retirement contributions by employers should not count toward this limitation insofar as they are fully taxable upon distribution. Only a percentage of Health Savings Accounts (HSA) contributions (which are not taxed upon withdrawal) should count toward the limitation.*° The limitation on benefit deductions should not be indexed to increase with inflation.”” Employers should also be denied deductions for health insurance and other benefits provided to employee dependents if the dependents are aged 23 or older.