REPUBLICANS PROMISED Americans a smart, careful tax reform that would simplify the code without adding a penny to the debt. The bill that House Republicans released Thursday betrays that promise. It also betrays the nation’s children, and their children, who would eventually have to pay for this big, unpaid-for tax cut that the country does not need.
Republicans began their tax reform effort months ago with a plausible argument. They could lower tax rates, particularly on corporations, if they ended tax breaks at the same time, one balancing the other. The result would be a leaner, clearer, more efficient code that raised just as much revenue.
The bill that House Republicans released Thursday actually tracks this concept in part. Braving blowback from interest groups, GOP lawmakers proposed limits on tax breaks such as the mortgage-interest deduction and the state and local tax deduction. But the plan has a fatal flaw: It would cut far more by lowering tax rates than it would raise by closing loopholes. It is far out of balance.
How far? The Committee for a Responsible Federal Budget’s Maya MacGuineas warned Thursday that the House plan would cost $1.5 trillion over 10 years, and, because of the way it is written, the price could end up being even higher. “No credible model shows that tax cuts will create enough growth to fill the funding gap,” she concluded, echoing the views of most independent experts.
If the nation were in the midst of a recession, Republicans would have an argument for a deficit-financed stimulus. But the economy is growing and does not need a short-term boost. In fact, with the economy expanding, this should be the time to reduce the nation’s already alarmingly large debt. That is a principle Republicans passionately embraced — when they were in the minority.
The plan’s high price tag is even more egregious in light of the taxes Republicans intend to cut. The proposal would phase out the estate tax at the cost of $172 billion, which would almost exclusively help the wealthy. For $696 billion, it would eliminate the alternative minimum tax, which Congress created to ensure that loophole-savvy rich people pay at least some federal tax. The alternative minimum tax compelled President Trump, for example, to pay $31 million more in taxes in 2005 than he otherwise would have, which makes one wonder how he would personally benefit from this unnecessary shift in the tax code. Because he has refused to release his tax returns, unlike every other modern president, we can’t know for sure. But the GOP plan also would slash rates on “pass-through” businesses, costing the treasury $448 billion over 10 years. The Trump Organization is one such business.
The plan’s core provision, a $1.5 trillion cut in corporate taxes, slashing the rate from 35 percent to 20 percent, could be defensible — if it were paid for. Alas, it is not. The nation needs tax reform, but it would be better off with no change than with this.