Trump’s tax reform pitch & the White House culture of half-assery

· August 31, 2017  
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President Donald Trump speaks about tax reform, Aug. 30, 2017, at the Loren Cook Company in Springfield, Mo. | Alex Brandon | AP Images


It’s impossible to simultaneously drain the Swamp but then ask the Swamp for help on how to drain it. This is essentially the lesson lost on President Trump as it relates to taxes.

The president’s speech in Springfield, Mo., Wednesday was a rerun of the platitudes Republicans have been propagating for a decade … the tax code is too complex; the tax code has too many loopholes; we need to make America more competitive. However, there was no beef. No plan. What are the rates? Corporate? Individual? What are your red lines or major priorities? This is show-time for governing, not the kickoff of the campaign.

And it doesn’t exactly help that Ivanka and Steven Mnuchin were accompanying him during this speech and seem to wield influence over this issue.  

One of the few good things President Bush did on fiscal policy was to propose a very specific across-the-board rate cut from day one of his campaign. He relentlessly campaigned on it and even had a tax-cut calculator on his website, showing voters how much money they would save. This, at a time when the internet wasn’t even a dominant factor in politics.

Bush then got to work immediately and had GOP leaders introduce his plan. The tax cuts passed Congress in May of his first year and were signed into law on June 7, 2001.

Fast-forward 16 years and there is no specific plan to speak of as late as nearly September. Instead, the White House, which usually writes major legislation when the president’s party controls Congress, has completely outsourced the plan to the swampiest of Swamp creatures.

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The president said in his speech that he hopes Congress doesn’t fail him like they did on health care. Well, that is exactly what is going to happen, because he has no position of his own and is outsourcing it to the same people he did with health care. You can’t protect the hen house if you send the foxes out to guard it.

It’s true that, constitutionally and mechanically speaking, Congress writes the legislation. Yes, Trump could merely sit behind his desk and just veto or sign anything that comes to him. But the presidency has changed dramatically since the late 1800s, when that was more or less the function of the chief executive.

Moreover, we already know Congress is broken, which is why Trump was elected to use the bully pulpit to demand change. Again: You can’t demand change while simultaneously begging the troublemakers to do your homework. They’ll be happy to do what they want.

The coming pitfalls on the tax issue

The need for specific details on taxes is particularly important because, as I’ve noted before, there are a number of factors that can easily turn the tax play into an interception. Given the national debt issues, the way Republicans respond to class warfare, the fact that the Reagan and Bush tax cuts already made it hard to cut taxes significantly more for those who aren’t already upper income (and the GOP is terrified to cut their taxes), and the fact that health care is the biggest tax issue and we are not fixing it, there aren’t too many ways this turns out for the better.

Facts and details matter, and in the case of tax reform, the micro details are everything and determine whether a plan is ultimately an effective tax increase or tax cut for particular groups.  

The problem is the same culture of half-assery that led the White House to support a health care bill that actually increased premiums and didn’t repeal Obamacare could very much lead to a tax plan that raises taxes on middle-income and middle-upper-income families … unless more details are worked out. Cutting rates and getting rid of “loopholes” sounds nice in theory, but the devil is in the details of the rate cut and the amount and nature of the deductions being repealed.

Republicans have put forth plans in recent years that have actually made the tax code more progressive and more redistributive under the cloak of similar vague principles.

While conservatives wouldn’t have created a code built on tax deductions for real estate taxes and other “loopholes,” getting rid of them without a significant corresponding marginal rate cut could really screw over middle-income married families in the 25 percent tax bracket that own homes, much less upper-income families.

Then, because Republicans are always sheepish about cutting taxes for those who actually pay them, they wind up offsetting them with more refundable credits for those who don’t pay taxes on net. Thus, it makes the political capital and the policy outcome not worth the effort relative to other issues.

That is why I don’t think taxes should be a major priority in the first year of the Trump administration, especially not over health care, crony capitalism, immigration, national security, and the courts.

Nonetheless, if Trump is committed to investing his capital on the tax issue, he must ensure that it comports with his guiding principles. And the only way to do that is to offer his own plan.

Ideally, we’d move to a consumption-based tax because the entire structure of the income tax (and its political problems) is hard to rectify. But if we are going to make reforms within the existing income tax system, we must ensure that the code doesn’t become more progressive, more redistributive, or result in a net tax increase on anyone outside of those with anomalous circumstances.  

Trump’s guiding principle on policy should not be to enlist the help of the Swamp. It must be to demand its compliance.       

Author: Daniel Horowitz

Daniel Horowitz is a senior editor of Conservative Review. Follow him on Twitter @RMConservative.