As president, Donald Trump has vowed to push forward with a comprehensive tax reform plan that at this point is a little short on details. Congressional Republicans, meanwhile, have offered a well-defined plan of their own — a proposal the new president should endorse.
The goal would be to drastically simplify the nation’s complex tax code — a code that keeps an army of accountants and attorneys in businesses while encouraging corporations to shift profits and jobs overseas.
Senate Majority Leader Mitch McConnell, R-Ky., and Speaker Paul Ryan, R-Wis., have pledged to pass a “revenue neutral” tax package that would not add to the deficit. But a streamlined tax policy would have the welcome consequence of increasing growth, boosting corporate competitiveness and generating higher revenues by allowing individuals and businesses to more efficiently allocate resources.
Most of the heavy lifting, at this point, has taken place in the House. GOP reps in the lower chamber hope to reduce the top individual rate from 39.6 percent to 33 percent, and drop the number of brackets from seven to three. Allowing for political realities, they would keep some of the most popular tax breaks, including deductions for mortgage interest and charitable contributions.
The standard deduction would be increased, giving fewer taxpayers reason to itemize. Small business owners would receive a special maximum tax rate of 25 percent, and while investment income would be taxed like wages, investors would be subject to taxes on only half of that income.
Passing such a massive tax package will be a challenge and require some shrewd political maneuvering — the last significant reform to the tax code took place almost 30 years ago under when Ronald Reagan. The AP notes that both Sen. McConnell and Rep. Ryan say they will use legislative tactics to block a Democratic filibuster in the Senate. Thank you, Harry Reid.
Let’s hope it doesn’t come to that. Some key Republicans believe it’s important to attract Democratic votes. Fine. They should start by negotiating on corporate tax rates, which even many on the left admit have led to unintended consequences. In addition, GOP outreach should focus on the Democratic senators who face re-election in 2018 and hail from states that went overwhelmingly for Mr. Trump.
But the push for bipartisanship shouldn’t entail abandoning the core principles of reform, including simplification, efficiency and equity for all earners. If Democrats insist on sitting this one out and screaming about “the rich” to motivate their progressive patrons, Republicans shouldn’t waver.