This isn’t to say that tax reform is a bad thing. Far from it. Reform of the corporate tax code could help draw investment to the United States and repatriate overseas profits. We should try to get the government out of the job of picking winners and losers and of doling out tax trinkets to cronies. We should try to encourage investment. But the magnitude of the gains to be had and the unlikeliness of a solution anytime soon should, and I think will, direct Republican energies elsewhere.
The House has yet to even come up with a tax reform bill. Outgoing Ways and Means chairman Dave Camp (Mich.) has a “discussion” draft circulating around. But, according to Budget Committee chairman Paul Ryan (R-Wis.), Camp did not want any specific tax bill included in the latest budget.
Pro-energy policies, regulatory reforms and other spending items would have a positive growth effect. The budget document states: “The economic benefits of expanding oil and gas development on federal lands are well documented: According to recent studies, 500,000 new jobs a year in high-wage, high-skill employment sectors and GDP spill-over effects for $14.4 trillion in cumulative increased economic activity would be generated over the next 37 years.”
Immigration reform, including improved access to high-skilled workers, is also an economic booster. Education reform and support for basic research are other ways to enhance growth. (“The resolution preserves basic research, providing stable funding for NSF to conduct its authorized activities in science, space and technology basic research, development, and STEM education while shifting the focus back to basic research,” says the budget document. “The budget provides continued support for NASA and recognizes the vital strategic importance of the United States remaining the pre-eminent space-faring nation. This budget aligns funding in accordance with the NASA core principles to support robust space capability, to allow for exploration beyond low Earth orbit, and to support our scientific and educational base.”)
In a perfect political world, tax reform would be a fine idea, but in the real world the GOP would do well not to make it the preeminent focus of its agenda. This may be heresy in some circles, but if Republicans want to make effective policy choices and advance popular items to enhance their chances of winning the Senate in 2014 and the White House in 2016, they’d be wise not to harp on tax reform. And in fact, the House budget seems to diminish expectations for tax reform. (“This resolution calls on comprehensive tax reform and lays out some principles, but it does not embrace any particular plan. There are many good ideas on that front — growth-oriented tax plans that could strengthen the economy and support the nation’s funding priorities.”) That’s not a sell-out; that’s smart governance.
Should tax reform remain part of a conservative agenda? Certainly, and if the GOP gets the White House we might see some discrete reforms or even a reworking of the corporate tax code. A move to step away from endless fights over the minimum wage and toward an enhanced earned-income credit for those working full time would be a smart way of attacking poverty and promoting work. But should tax reform be the main item on the GOP’s agenda? Not for now.