Is there substance to tax reform?

bat

Read my lips: no new taxes–George H. W. Bush at the 1988 Republican National Convention

Tax policy is hard; details of proposed reforms are scarce. Players disagree on what reforms are needed. Many claims for benefits of tax reform are incredible. Here are some I find hard to believe:

  • High corporate tax rates hurt American business (effective rates are low; some profitable corporations (GE, Google) pay little or nothing).
  • Tax reform will increase American competitiveness (Ways and Means).
  • Tax reform will increase take-home pay for middle class Americans (Ways and Means).
  • Fewer income tax brackets simplify tax returns (Tom Reed).
  • Many Americans favor one proposed reform or another (they have little idea of what is proposed).
  • Tax reform will create jobs.
  • Tax reform will bring jobs back from overseas.
  • Tax reform will spur economic growth.
  • Tax reform which lowers taxes for all can be revenue neutral (voodoo).
  • Tax cuts can be offset with cuts in government spending.
  • Estate taxes known as “death taxes” are abominable.
  • A National Sales tax is preferable to income tax.
  • A flat rate income tax (Flat Tax, Fair Tax) is preferable to progressive income tax.
  • Tax rate cuts will pay for themselves (voodoo).
  • Corporations that retain profits overseas to avoid taxation must be bribed with tax cuts to stop doing that.
  • Mexico will pay for a wall (Trump).

Some of these might be true under specific circumstances, but not as generalities.

Here are some ideas I do believe:

  • Tax cuts for wealthy individuals benefit none other.
  • Income taxes should be progressive; marginal rates must be higher than today if we are to shrink the deficit.
  • One reform which would increase revenue is to adequately fund enforcement.
  • Uniform corporate income taxes don’t unreasonably burden businesses large or small.
  • To balance the budget more tax revenue is needed.

I don’t expect Congress to accept any of these; non-partisan tax reform in the public interest is unlikely. We might wish Congress would leave taxes well enough alone.

Players disagree:

  • Majority Leader McConnell says tax reform should be revenue neutral. Others disagree or agree only if revenue is predicated on unlikely economic growth.
  • Fiscal Conservatives favor a balanced budget. Others disagree or would count a budget as balanced if it might somehow happen bye and bye.
  • Paul Ryan is said to favor a  new “Destination-Based Cash Flow Tax” better known as a “Border Adjustment Tax” (BAT). The Trump Administration and Majority Leader McConnell reportedly disagree.

How these conflicts might be resolved is unclear.

Those with a taste for the arcane, might want to study the issue of repatriation tax proposals including “deemed repatriation.”

The Politico article cited explains the conflict over BAT in some detail. It is a new tax, which would raise new revenue. New revenue could be used to offset reductions in other taxes.

Paul Krugman’s article explains how BAT might affect the economy.  I note only his conclusion, that whatever else BAT might do, it wouldn’t help pay for a wall.

If Congress enacts Ryan’s BAT, President Trump might not sign the bill. But by then it may be a President Pence who would.

http://www.cbpp.org/research/federal-tax/three-types-of-repatriation-tax-on-overseas-profits-understanding-the

http://www.politico.com/story/2017/05/22/paul-ryan-trump-tax-battle-238692

https://krugman.blogs.nytimes.com/2017/01/27/border-tax-two-step-wonkish/

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About whungerford

* Contributor at NewNY23rd.com where we discuss the politics, economics, and events of the New New York 23rd Congressional District (Allegany, Cattaraugus, Chautauqua, Chemung, (Eastern) Ontario, Schuyler, Seneca, Steuben,Tioga, Tompkins, and Yates Counties) Please visit and comment on whatever strikes your fancy.
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6 Responses to Is there substance to tax reform?

  1. Rynstone says:

    “To balance the budget more revenue is needed” !?!?!?!??! This is crazy talk !
    Absolutely the wrong idea or plan to follow. The Federal Government (and NY State government) has been growing and spending at a higher rate than the private sector.

    The Federal government has been collecting and setting revenue records but continues to outspend these increases continually running spending deficits. Our government does not have a taxing problem, it has a spending problem. Many of the Republicans in Congress have this problem along with most, if not all, of the Democrats in Congress. President Donald Trump also has this problem as did Presidents Obama and G. W. Bush. Let’s hope and pray that President Trump and the Congress can give us a real budget process that cuts spending and reduces the annual budget to below annual revenues. (Appropriations Budgets are needed, which we never had during any of the eight years under President Obama with first a Democrat Controlled Congress and then finally a GOP controlled Congress)

    The last time we had a budget that took in more than it spent Bill Clinton was the President and Newt Gingrich was the Speaker of the Republican controlled Congress. And during this period the Federal Government did not pay any of the National Debt down.

    There are many news articles that talk about this. Here are a few.
    http://www.cnsnews.com/news/article/terence-p-jeffrey/695391000000-feds-collect-record-income-taxes-through-march

    http://freebeacon.com/issues/1-48-trillion-government-collects-record-high-taxes-first-half-fy-2016/

    http://www.mygovcost.org/2017/04/17/u-s-government-sees-record-tax-revenues/

    Big Government Always Leads To Big Government Bureaucracy Ineffectiveness and Waste
    Big Government Is Too Expensive and Oppressive
    Big Government Sucks
    The US Constitution Is The Tool For Smaller Effective Government And A Prosperous Nation

    • whungerford says:

      When times are good as now, we should pay down debt. One way to do this is to increase taxes. Ryan’s BAT proposal is a new tax which would raise trillions. If this were enacted, we should use the revenue to pay down debt, rather than giving income tax breaks to the well-to-do.

      • Rynstone says:

        People who actually pay federal income tax should get a decrease. We also have to stop giving people more federal income tax refunds than they pay in.
        Actually, eliminating the federal and state income tax would jump start the economy and the lost revenues would be made up with increased sales taxes and increased corporate earnings taxes.
        (I believe that the “Income Tax” should apply only to “investment income” and not apply to “payroll earnings”)
        The Government must reduce spending before it can reduce tax revenues.

        Study the taxing and Government spending policies of first Warren Harding and then Calvin Coolidge. Warren Harding “Talked The Talk” but Calvin Coolidge “Walked The Walk”.

        We need another principled President that could follow the economic policies set by Calvin Coolidge.

        Big Government and Big Government Spending Suck

        • whungerford says:

          Coolidge was President during the “Roaring Twenties” just prior to the Great Depression.

          • Rynstone says:

            No where have I read that Coolidge was accused of being accountable for the Great Depression. The Great Depression in the US was caused by a world wide depression and an out of control bubble stock market that collapsed.

            The policies of FDR made the depression worse and was responsible for prolonging teh depression. FDR was a big time socialist. FDR’s wife Eleanor Roosevelt was a Communist.

            Look at Calvin Collidge’s reduction in government spending and then during the next few years reduction in federal taxed. Just like the tax cuts of Reagan that gave Bill Clinton a good economy.

            The John F Kennedy and Johnson administrations and the country’s economy both did well under JFK’s tax cuts.

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