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A Taxing Situation

Having failed in their efforts to repeal and replace Obamacare, President Donald Trump and the congressional Republican majorities are moving on with plans to revamp America’s tax system. So far, at least, it doesn’t look any more promising than the previous crusade.
Which is a shame, as America’s tax system is badly in need of revamping, and the traditional Republican remedies are probably best. The system should be simplified, flattened, rid of deductions that serve only well-lobbied special interests, include more deductions that encourage investment in the broader economy, and that highest-in-the-world corporate tax rate especially needs lowering. If commensurate budget cuts could somehow be effected, so the already disastrous national debt didn’t explode, it would probably be helpful to lower every other tax in sight.
A Republican president and Republican majorities in Congress should be able to get it done, and even persuade a few centrist Democrats from well-heeled districts with big corporate donors to go along, but at this particular moment it seems a daunting task. Any attempt at serious tax reform is difficult, as all sorts of well-lobbied special interests immediately get involved, and there are lots of class resentments and economic theories to be considered, so that last time it happened was way back when President Ronald Reagan unified the Republican minorities in Congress and got more than a few centrist Democrats in well-heeled districts to go along.
This time around the Republican president is Trump, the leaders of the congressional Republican majorities inspire little more confidence, the Congressional Democrats are more unified in opposition to anything they might come up with, and the economic and political circumstances aren’t quite so ripe.
When Reagan offered his 461-page tax plan to Congress he knew every minute detail of it, and had spent the previous decades making a persuasive case to America for the sophisticated free market theories that inspired it, and with his experience as a past president of the Screen Actors Guild and two-term governor of California he knew the more down-and-dirty practical arguments to use with reluctant Republicans or potentially friendly centrist Democrats from well-heeled districts. The tax rate on the uppermost bracket was 70 percent at the time, which was steep even by the standards of the moribund European economies, cutting that by rate to 28 percent freed a lot of capital for pent-up investment in the private sector, and after the stagflation that had started in Nixon administration and lasted through the Ford and Carter administrations, most of the the country and enough Democrats were willing to roll the dice on those sophisticated free market economic theories.
When Trump unveiled his nine-page outline of how to revamp America’s tax system during a typically rambling speech in Indiana, we couldn’t shake a vague suspicion he didn’t understand a word of it. We had a hard time making sense of it ourselves, as did everyone else we’ve read, but everyone seems to agree with Trump’s opening unscripted that it does involve those “massive tax cuts” that Democrats are always accusing Republicans of yearning for.
During the speech Trump insisted the vaguely worded tax plan wouldn’t benefit himself, and he added his catchphrase “believe me,” which will surely endear him to his many lower-bracket fans, but until he releases his tax returns you’ll have to take him at his word, and by now most Americans don’t. Reagan had released his tax returns and put his relatively modest fortune into a blind trust, so he didn’t have that rhetorical problem. He could also make a case that taking a 70 percent cut from anybody who got lucky or smart enough to make it to that rarefied tax bracket was unfair, whereas Trump is stuck with a rate that went up and down and up again through the Clinton and Bush and Obama administrations and lands in a mid-30s range that strikes the more average earner as about fair. The relatively insignificant cuts proposed won’t unleash a relatively significant amount of capital into the private sector, too, and with Trump constantly boasting about how high the stock market indices and how low the unemployment rates are the populace probably isn’t in any mood for tax cuts for the rich at the moment.
Those Reagan tax cuts brought a promised doubling of federal revenue collections, but without any commensurate budget restraint the deficits and debt swelled. The broad economic expansion nonetheless continued long enough to get his vice president elected for a third term, and although a brief and relatively mild recession got President Bill Clinton he fiddled so slightly with the tax system that all that capital wound up investing in a technological revolution that has propelled the American through the desultory administrations of George W. Bush and Barack Obama and even into the era of Trump. That soak-the-rich mantra the Democrats are still loudly chanting is as stupid as ever, and we discern a few very good ideas in that nine-page outline about how to revamp the tax system, so we’ll hope for the best.
The highest corporate tax rate in the world is an obvious problem that every last Republican and at least a few centrist Democrats with corporate donors should want to solve, and there’s also a strong case to be made against estate taxes, but there was also a strong argument to be made for repealing and replacing Obamacare. Trump and the congressional leadership weren’t quite coordinated on how far to slash the corporate tax rate, both were failing to acknowledge that the actual corporate tax rate is much lower, given all the deductions their lobbyists have obtained, most of which do have a invigorating affect on the broader economy, and we can’t shake a suspicion that Trump is about to find out that tax reform is even harder than health care.
The Republican majorities in Congress are as always all hepped up for tax reform, but they have diverse districts and different donors and individual viewpoints to consider, and no matter the ranch hands Republicans are always harder to round up in a pen than Democrats. There are still a few debt-conscious Republicans left, perhaps including the Speaker of the House, some Republicans from less well-heeled districts that went big for Trump and his promises of tax hikes on the rich, and even some free market hold-outs who now worry that the tax rates are not far off from optimal. A zero percent tax rate yields zero revenues, but so does a 100 percent tax rate, and both liberal and conservative have always agreed there’s some point in between at which tax rates start to result in lower revenue, which many of our states have tried to ignore, but with Trump boasting about the great economy he’s unlikely to convince anyone outside the hated Republican establishment that his rich buddies and cabinet members need any sort of tax break.
If it we’re up to us we’d concentrate on the arguments for a lower corporate tax rate, which are so compelling they have even persuaded all of the Europeans and the Asians, state the moral case that after someone has spent a long and fruitful life paying exorbitant taxes he shouldn’t be taxed a final for dying, and not antagonize any of those lower-bracketed and class-resenting die-hard Democrats and heartfelt Trump supporters with any noticeable tax cuts for the rich, and if we were Reagan we could probably get it done. Trump isn’t at all a Reagan-esque sort of ranch hand you might have seen on the silver screen, neither are that Senate Majority Leader or House Speaker, and at this point we can’t see any of them winning over any sort of Democrat. We’ll still hope for the best, but we won’t be making any bets, and will anxiously wait to see where the Wall Street money goes.

— Bud Norman

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The Next Two Years of Nothing to Do

With Republicans firmly in control of both chambers of congress and a Democrat still wielding a veto pen in the White House there is little chance of the federal government getting anything done during the next two years, which is fine by us. Inaction will be much preferable to all the things the Democrats got done when they controlled everything, and it should provide a political advantage to the Republicans.
The newly-elected Republican majority should be able to quickly pass a number of bills that the four-year-old Republican majority in the House has already approved, all of them with enough poll-tested popularity to make a veto politically problematic for the president, and the even the most dutifully partisan scribes will be hard-pressed to explain how the party that just racked up the impressive wins in the mid-term elections is thwarting the will of the people. There’s talk that a first volley will be a green light for the XL Keystone Pipeline, which everyone except for a few extreme environmentalists thinks is a good idea and long overdue, and even if the president is forced to sign it he’ll endure the resentment and reduced fund-raising of those few extreme environmentalists and get little credit from the rest of the country in exchange. An all-out repeal of Obamacare would be a futile if satisfyingly symbolic gesture without the 61 votes required to override a veto, and would stir up an unnecessary fuss over the one two items within the law’s thousands of pages that enjoy popularity among the more misinformed portions of the population, but piecemeal repeal of he law’s most troublesome and obviously stupid provisions should knock a few points off the president’s approval ratings every time he vetoes one of them. There are enough of those troublesome and obviously stupid provisions that the Republicans should have him down to zero in short order, but we’d urge that they continue the practice nonetheless. A much needed overhaul of the tax system would also be futile and afford an opportunity to bamboozle the uniformed, but the tax laws include enough obvious and undeniable trouble and stupidity that the Republicans should be able to score similar points with a series of slight reforms, with a corporate tax rate that imposes a competitive disadvantage on every American business in global markets an excellent place to start, and relief from the carbon regulations championed by the aforementioned few environmental extremists are just of many pro-growth proposals that will at least draw attention to the president’s unpopular positions.
A steady stream of obligatory news stories about these bills would quickly dispute the president’s cliches of a “do-nothing congress” and a “party of no,” but the Republicans could also benefit from what they don’t do and when they say “no.” Voting for budgets small than the presidents inevitably lavish proposals won’t cost any popular support, and we can’t think of any pending Democratic proposals that cannot be opposed without offending anyone other minimum-wage workers and ineligible voters and a few environmental extremists. More aggressive joint committee investigations into the scandals surrounding Benghazi, the Internal Revenue Service, just about everything in the Department and Justice, and numerous other overlooked stories is also a good idea, not just for an easily forgivable spite but because the serious nature of these matters demands investigation and public attention. The Democrats who survived Tuesday’s mid-terms owe no favors to the president, whose insistence on making the election a referendum on his own unpopular policies was a godsend to the Republicans, and the congressionally-passed will in many cases even have a claim to bipartisanship.
Meanwhile, the president will get things done by executive action. Amnesty for millions of illegal immigrants and economically damaging regulations intended to prevent the climate from changing will prove unpopular, and the extra-constitutional way they are imposed will also prove unpopular, but at this point the very lame president seems quite unconcerned about public opinion or his party’s political fortunes. Any congressional efforts to thwart such actions by withholding funding or anything else at hand will please a large majority of the public, even if the resulting court battles stretch out long past the president’s final term, and will leave the next Democratic presidential with some difficult explaining to do. If the president finds it too bothersome to deal with an oppositional congress he might choose to focus his attention on foreign policy, where the constitution does allow him some leeway, but that’s likely to redound to the Republicans’ benefit as well.
The inevitable gridlock will delay for two years the tax cuts and deregulation and downsizing of everything except a military that desperately needs some additional funding, but if the Republicans continue their recent uncharacteristic savviness it might make all those things possible after one more election cycle. Tuesday’s election produced a strong slate of Republican candidates, the likely Democratic candidate is an aging and increasingly unpopular woman who is insuperable from the previous administration’s disastrous foreign policy and redistributionist economic theories, and if the government doesn’t do anything in the next two years it won’t do anything to change the minds that voted for solid Republican majorities in the House and Senate. Leap years always bring in the uniformed voters gullible to scare stories about wars on women and lynch mobs and cuts to Social Security, and demographic trends and an entrenched liberal news and entertainment media establishment and a growing number of people dependent on government support all make presidential elections difficult for Republicans, but the next two years of inaction could level the playing field.

— Bud Norman