Despite all the challenges tax reformers face, Goldman Sachs analysts say there’s a 65 percent probability that tax reform will happen by 2018 — but “there is plenty that could still go wrong.”
In a note to clients, Goldman’s economics research team points to a number of developments that represent positive momentum for a tax overhaul, from the Senate Budget Committee’s agreement to allow tax cuts to add up to $1.5 trillion to the deficit over 10 years to the coming House vote on its own budget resolution to the release of the “Big Six” framework last week, which they say “signals a narrowing of tax policy differences.”
Even so, Goldman says the Senate’s $1.5 trillion number for tax cuts represents the high end of likely outcomes, and cutting revenue by that much might still cause some Republicans to balk. Beyond that, fleshing out the other details of the announced framework — especially the questions about which tax breaks might get eliminated — will be challenging. And some of the proposed revenue-raisers, like the elimination of the deduction for state and local taxes, “are likely to be very difficult to achieve.”
