When I started as a reporter many moons ago, I learned of a particularly deadly corner of the journalism business known as the DBI: stories that are dull-but-important. Reconciliation of the House and Senate tax bills is classic DBI.
But this particular dull topic is very important indeed. In hashing out the final bill, Republican leaders can improve a law that will touch every American — or make it a whole lot worse.
The key is clear thinking about the purpose of this law. Not the political purpose, which is obvious to everyone. Republicans control the entire federal government and want desperately to notch an accomplishment (something! anything!). You could stamp TAX REFORM on the owner's manual of a 2003 Subaru, and Congress would pass it on a party-line vote. Followed by President Trump tweeting a picture of himself on Mount Rushmore.
We need clarity on the economic purpose of the law.
Those who say tax cuts are necessary to spur growth and create jobs have it wrong. That might have been true in 2010, when tea party tax-cutters roared onto the scene. However, between the George W. Bush administration, the Obama administration and the Federal Reserve, government has pumped more than $6 trillion of stimulus into an economy flattened by the Great Recession. Coupled with the hard work of millions of Americans and similar efforts by leading economies around the world, that ocean of money has finally lifted us to the economic high ground of solid growth, near-full employment, abundant capital and surging consumer confidence.
A healthy society, at this point in the economic cycle, would pay down public debt and marshal resources for the next rough patch. Instead, according to the nonpartisan Congressional Budget Office, our leaders are preparing to take us $1.4 trillion deeper into the red over 10 years. It's even worse if you factor in congressional accounting gimmicks.
We don't need more debt-fueled stimulus. We need a simpler, more globally competitive tax regime. If Congress focuses squarely on those purposes, the goals can be achieved for a lot less than $1.4 trillion.
There is still time for Republican leaders to sober up. First, they should seize Trump's offer to bend on his 20 percent corporate tax target. The president mentioned a 22 percent rate, and I bet he would settle for 23 percent or even 24. Any of these would represent a historic reduction from today's 35 percent nominal rate and would make doing business in the United States attractive compared with our competitors.
Each percentage point represents about $100 billion over 10 years. And you know what they say: $100 billion here, $100 billion there, pretty soon you're talking about real money.
Congress should use that money to further reduce the overall price tag of the bill, not as an excuse to dish out pork like it's the Iowa State Fair. With the tax reform bandwagon pulling away from the station, every grifting special interest in Washington will be trying to hop aboard. Don't let them.
Forget about cutting the top personal income tax rate. As a class, America's one-percenters are creative, generous and public-spirited, but they get a pretty sweet deal out of living here — driving on our highways, breathing our clean air and building businesses protected by the rule of law and Uncle Sam's armed forces.
Today's top rate for individual earners is just under 40 percent — neither high nor low in historic terms. Running deeper deficits to cut that number by a point (as the Senate would do) is useless symbolism, while sharply raising the income level at which the top rate kicks in (as both bills propose) is more than we can afford. After all, nearly everyone who pays the top rate will benefit from the corporate cut, as companies distribute their windfall to shareholders. Indeed, wealthy Americans have already banked strong returns from a rocketing stock market fueled, in large measure, by the prospect of the corporate tax cut.
Forget, too, about killing the estate tax, as the House proposes to do in 2024. I understand the philosophical argument: Much of the wealth accumulated over a lifetime or over generations has already been taxed as income or capital gains and shouldn't be taxed again. But Congress is running a country, not a philosophy seminar, and the country has doubled its sovereign debt in just a decade.
Keep the good stuff, like doubling the standard deduction to simplify the tax returns of millions of working Americans. And choose the Senate approach to the child tax credit, which puts more money in the pockets of people who need it most.
Republicans are going to get the tax reform they seek. But it doesn't have to be a law to be ashamed of.
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