There is Much to Like in Donald Trump’s Tax Proposal

While there is much to like to President Trump’s proposal for tax reform, let’s not get too excited until we see his bullet-point list translated into actual legislative proposals.

There’s a lot for fans of smaller government to like in the outline of President Donald Trump’s proposal for tax reform. However, what’s being touted as a “plan” isn’t really much of a plan. Instead, the White House released a single-sheet list of bullet points with desired changes – and some of the key ideas of House Speaker Paul Ryan, R-Wisconsin, are missing from the proposal.

At the other end of Pennsylvania Avenue, tax reform has long been a pet project of House Speaker Paul Ryan, R-Wisconsin. After the initial failure to pass the American Healthcare Act debacle, it appears that Trump now doesn’t trust him to come up with a tax-reform bill that can pass. So instead, they brought forward this proposal on their own, and some of Ryan’s key ideas aren’t in it.

In some cases, that’s good. Gone is the “border adjustment tax” that Ryan has been pushing. This massive tariff by another name sought to pay for tax cuts elsewhere by imposing a new tax on imports. It’s an ironic situation: President Trump ditching a protectionist anti-trade idea supported by Ryan.

Under the Trump plan, the tax on businesses and other corporations would fall to 15 percent, and making the United States once again competitive internationally . Income tax brackets would be simplified and condensed into three rates. The United States would join the rest of the world in adopting a “territorial” tax system. These are all excellent and long-overdue ideas for reform.

In order to make up revenue, the plan would ax many common deductions as part of simplification, an idea long endorsed by many economists of a variety of political persuasions. Notably, the deduction for state and local taxes paid would be effectively abolished. This would end the de facto subsidy whereby taxpayers in lower-tax state and local jurisdictions pay more to benefit taxpayers in high-tax state and local jurisdictions. It would make internal tax competition between cities and states much more effective, though it would heavily penalize people currently living in high-tax jurisdictions.

What’s not to like? Well, will it pass by getting 218 votes in the House and 50 votes in the Senate? Ditching any pretense of revenue-neutrality, a Trump campaign pledge, is a good thing. We should be cutting taxes, not just moving them around.

However, there are no spending cuts or spending restraint to go with these tax cuts. This is likely to lead to a hike in deficit spending, the same mistake of Presidents Ronald Reagan and George W. Bush in their tax cut efforts. It might also make it harder to acquire deficit-hawk votes in the GOP to pass it.

Besides, all we really have is a single page bullet point list from the White House. It’s worth waiting to see what, if anything, actually gets voted on in Congress.

Andy Craig

A writer and political consultant in Milwaukee, WI, Andy Craig is active in several roles within the Libertarian Party, including two campaigns for public office, re-establishing official party status in Wisconsin, and receiving over 11% of the vote for Congress. He works with candidates on recruitment, strategy, messaging, ballot access, and endorsements, overseeing the latter for the Johnson/Weld campaign.

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