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.
- 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.