An economic adviser to president-elect Donald Trump on Wednesday said that he would recommend that the incoming administration consider tackling business tax reform in a separate bill from individual tax reform.
“I think that the business tax reform is a lot easier to get done,” Stephen Moore said at an event hosted by Politico. “I would label this a jobs bill.”
The GOP House wants to do individual and corporate tax reform together. Since 2010, when the GOP won its majority, it has never agreed upon, let alone put up for a vote, a specific tax-reform measure, although House Speaker Paul D. Ryan (R-Wis.) and others have suggested various iterations. And that is one reason Moore is right: If House Republicans wait for individual tax reform to happen, it may never get done.
There are other reasons to divide up the tax-reform approach. If the incoming administration wants to chalk up a win and get a bipartisan bill done, corporate tax reform — revenue-neutral in a static analysis — is a much, much easier undertaking. So long as revenues are equal to or higher than the current system (which dynamic analysis accounting for expected growth would surely confirm), both parties should be on board with removing loopholes and so-called tax expenditures that distort the tax code. Republicans don’t say it enough but a flatter code with less distortion is going to increase productivity; inefficient economic activity designed to accumulate tax breaks will decline.
The report continues:
Moore said he’d love to see a business tax bill “done in a bipartisan way,” perhaps with the support of some Democrats and the inclusion of infrastructure spending. On Tuesday, he suggested that a tax bill could be a jobs bill that contained infrastructure spending in a meeting with members of the House Republican whip team.
Trump has proposed using revenue from the repatriation of U.S. companies’ foreign earnings to help finance infrastructure, but congressional Republicans have been less enthusiastic about using repatriation revenue for that purpose.
Again, Moore is more realistic in his outlook. Republicans may want to allow repatriation so as to reduce rates overall or to reduce the debt, but that’s neither politically nor economically feasible. In fact, linking corporate tax reform and infrastructure makes it all the more likely both sides will want it to pass.
Candidly, we favor putting individual tax reform off into the future because what Republicans want — huge tax cuts that disproportionately benefit the rich and add trillions to the debt — is bad policy and would immediately undercut President-elect Trump’s populist message.
We have argued that the GOP has put far too much emphasis on tax reform as the engine of growth. Ideally, after passing a corporate-tax reform bill including a responsible infrastructure program, the White House and Congress could turn to other aspects of a pro-growth package: Regulatory reform; education, job training and apprenticeship initiatives; investment in R&D; and, yes, expanded high-skill legal immigration, which aids innovation, investment and wage growth for everyone. Perhaps Moore could even persuade the president-elect that trade is good for the United States and has not caused massive job loss. Well, that might be too much to ask for.