Larry Kudlow looks forward in this National Review Online piece toward the tax reform and other battles now that the James Comey hearings are over.
President Donald Trump cannot let a deluge of distractions disrupt his and the Republican party’s plans for meaningful health-care and tax reform. The Russian-collusion accusations, the fallout from the Comey hearing, the left-wing media’s daily barrage of anti-Trump propaganda — these are all distractions. And the administration and GOP Congress are in great jeopardy if they get caught up in it and take their eyes of the policy ball.
They must get some degree of health-care and tax reform done. This year. With tangible results in the next several months. If they don’t get it done, they’re going to get creamed in the 2018 midterms.
☕ Reason, as might be expected, takes an unorthodox view of the new tax reform proposal from the Trump Administration. However, along the way there are some interesting facts and figures.
A growing economy will undercut the appeal of his ethno-nationalist politics.
Cato’s Edward’s notes that the U.S. corporate tax rates are in the “strong Laffer zone.” (The Laffer curve, named after Arthur Laffer, the economist who formulated it, shows that up to a point, tax cuts lead to an increase in revenues by fueling business expansion, broadening the tax base and attracting more foreign investments.) Studies examining OECD countries have shown that corporate tax rates above 26 percent reduce government revenues. The U.S. corporate tax rate is 14 percentage points above that rate, which is why America has a lot of room to cut. Indeed, corporate revenues from Canada’s 15 percent central corporate tax rate right now constitute 2.1 percent of the GDP (which is a bit higher than what it was when those rates were twice as high in the 1980s) and America’s 35 percent rate 1.7 percent of the GDP, estimates Edwards.
☕ Dan Mitchell offers some reaction to the Trump Administration’s tax reform proposal launched yesterday.
By the way, the Wall Street Journal editorialized favorably about the plan this morning, mostly because it reflects the sensible supply-side view that it is good to have lower tax rates on productive behavior.
While the details are sparse and will have to be filled in by Congress, President Trump’s outline resembles the supply-side principles he campaigned on and is an ambitious and necessary economic course correction that would help restore broad-based U.S. prosperity. …Faster growth of 3% a year or more is possible, but it will take better policies, and tax reform is an indispensable lever. Mr. Trump’s modernization would be a huge improvement on the current tax code that would give the economy a big lift, especially on the corporate side. …The Trump principles show the President has made growth his highest priority, and they are a rebuke to the Washington consensus that 1% or 2% growth is the best America can do.
I’ve spent countless hours of a long career reporting on that question—tracking the story back to its origins on Arthur Laffer’s napkin in a Washington hotel in 1974; spending hours interviewing the colorful collection of characters who first peddled the idea, including the late Jude Wanniski, the late Robert Bartley, and the indefatigable Jack Kemp; following the conversion of Alan Greenspan, the apostasy of David Stockman, and the embrace by George W. Bush in rebellion against his father. I have read countless papers on both sides of the issue, and seen economic statistics tortured near death in defense of one side or the other.
So it is with some experience and a little weariness that I answer: it depends. Back in 1963 when the top personal tax rate was 91%, it is very likely the Laffer Curve held, and cutting exorbitantly high rates led to more revenue, not less, by increasing incentives to work and invest. It’s also true that for certain taxes that easily can be avoided—like the tax on capital gains (you don’t have to pay if you don’t sell the asset) or the tax on overseas earnings (you don’t have to pay if you don’t bring the money home)—a targeted tax cut can coax out more revenue.
☕ Adonis Hoffman writes about Jack Kemp, supply-spiders, and tax reform in this piece for The Hill:
The Economic Recovery and Tax Act of 1981 was the successful scion of Senator Bill Roth and Representative Jack Kemp. Kemp – Roth, as it became known, was the centerpiece of tax reform during the Reagan years, and served as a model for how the United States could deliver tax relief to both the business sector and the American people at the same time. It fostered an era of impressive economic growth and prosperity that many pine for today.
But that was long ago in a faraway galaxy. Today’s tax reform mandate, while no less compelling, is far more complicated.
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Of course, Jack Kemp’s brand of statesmanship has been long since absent in the Capitol. He was one of the modern-day leaders who connected the principles of conservatism with caring for the little guy. Nowhere was that more manifest than tax policy, where Kemp went the extra mile to make sure the needs of small businesses were attended. It was a welcomed view among harder-line Reagan Republicans and supply-siders who, up to then, showed little concern for small and minority firms. It should be a welcome view for the businessman-in-chief, as well.
To be sure, the current tax reform debate is a work in process. Before it is over, there will be many fits, starts, twists and turns that will lead – we hope – to a comprehensive, bipartisan tax proposal. We do not know what form that will take, nor who will emerge as the tax reform leader.
Whatever happens along the way, one thing is for sure: if America is to be great again, tax reform must provide a special measure of relief for small and minority business. The future of the nation depends on it.
☕ Hilarious tweet by Dr. John Rutledge. Taxes ALWAYS matter.
The tax reform plan that Congress comes up with will have to be judged on those merits, not on how it might, possibly, conceivably affect one person many years from now.
Simplifying the code in this way will also make seeing a politicians’ tax returns — Trump’s or anyone else’s — even less important, since tax liability will be a straightforward calculation and there will be far fewer ways to dodge the tax man.
The real story here isn’t Trump’s tax returns. It’s the fact that Democrats don’t want to engage on tax reform because their highly agitated liberal base doesn’t want them to lift a finger to work with Trump on any issue.
Tax reform is vital to restoring economic growth and vitality. No one denies that. If tax reform fails — and the economy suffers as a result — it won’t be Trump’s tax returns that are to blame. It will be shortsighted Democratic lawmakers kowtowing to the extremists in their party.
Using the repatriated revenue for infrastructure spending bothers me, but I can see how it would be a good move politically. Interestingly, those who favor the Republican Tax Blueprint are already arguing that the problem with not doing it all now (which is not possible anyway) is that when Democrats are in power they may undo the smaller set of reforms. That is possible — yet I find this argument interesting because these are the same people who are willing to pay for all the big reforms in the Blueprint with a border-adjustment tax (BAT). That feature, as I have argued before, puts a structure in place that could allow large tax-rate increases, a move to a VAT, and possibly a move to a VAT with a return of the corporate tax like the Europeans have when the Democrats are in power. In other words, the worst that can happen under the Kudlow-Moore-Forbes-Laffer plan is a return to our current system — which is bad but isn’t as awful as what the BAT could devolve into.
Read more at: http://www.nationalreview.com/corner/446878/republican-tax-reform-supply-side-feform-complicated
☕ Our readers will probably enjoy this from Learn Liberty:
☕ It’s a great point:
☕ Dan Mitchell is talking tax reform today. Check out his post, and also check out his Fox Business Channel appearance.
Mark A. Weinberger makes the case for tax reform in clear terms in this well wirtten guest column for Forbes.com:
To be successful, business leaders must be willing to push beyond our own parochial interests. We know tax reform must be fiscally responsible. That means tax cuts must be accompanied with reductions in existing tax incentives. A pro-growth American tax system that attracts capital from all over the world and responds to the needs of U.S. workers will be much more beneficial than one riddled with targeted benefits and historical incentives.
It is encouraging that Congress and the Administration are making serious efforts to move legislation that will upgrade our outdated tax system. With its competitive business tax rates and territorial-like international tax rules, the House leadership’s Tax Reform Blueprint incorporates key pro-growth provisions. However, there are significant differences over issues like border adjustment taxes and the elimination of interest deductibility. These issues will have to be resolved.
The problems of America’s outdated business tax system are well known, starting with the burden of having the highest corporate tax rate among industrialized countries. The U.S. rate of 38.9 percent compares poorly to the average 24.2 percent rate of the member countries in the Organization for Economic Cooperation and Development (OECD).