Listen to Prof. Brian Domitrovic as he talks at length about tax reform with the Americhicks, Kim Monson and Molly Vogt.
David Smick is in today’s Wall Street Journal talking tax reform:
If the GOP proposal isn’t aimed at helping workers, Trump will ask Democrats for a counteroffer.
Ultimately, Republicans are being forced to play small ball because a group of GOP deficit hawks worry that a big tax reform would undermine the budget. This fear seems out of proportion. Since 2000, under a Republican president and then a Democratic one, the national debt has soared from $5 trillion to nearly $20 trillion. The fiscal situation will only worsen with the coming entitlement-funding nightmare. Fretting about the deficit now is like worrying about a flickering candle in the front parlor when the entire house is on fire and the roof is about to cave in. Besides, true tax reform would eliminate deductions just as boldly as it slashes rates, achieving revenue neutrality.
Republicans shouldn’t play small ball. Their goal should be a tax-reform plan that will create robust economic growth, which in turn will help heal a bitterly divided nation. What would such a plan look like? Helping wage earners via tax policy is not a simple matter. People who earn less than $50,000 a year pay an average effective income-tax rate of 4.3%. What’s killing them is the payroll tax combined with the rising cost of health care. At minimum, the standard deduction should be tripled. But reformers also need to think creatively. Tax reform, entitlement reform and health-care reform cannot be considered in isolation. Working families need relief across the board.
That requires a bigger play than what some on Capitol Hill have in mind. But in the end, growth is everything. As he was preparing to run for president in 1980, Ronald Reagan was warned in a strategy meeting I attended about John Connally, a fellow candidate in the Republican primary. Connally, a former Texas governor, was raising big bucks from big business. By comparison, Reagan’s campaign coffers were lean. The future president’s response was aggressive. “Let him have the Fortune 500,” Reagan shouted. “I’ll take Main Street over Wall Street.”
This kind of “lunch pail” capitalism won Reagan the election and transformed the GOP—and the country. Isn’t it time for more “lunch pail” policy-making from Washington?
Listen to Art Laffer discuss the 1986 Tax Reform and the prospects for reform now:
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.