TAX REFORM was supposed to attract wide, bipartisan support. Lower rates would be fully offset by cutting unneeded deductions and loopholes. The benefit would be a simpler, more efficient tax code. But the idea has moved steadily toward just another irresponsible GOP tax cut, paid for with magical thinking, that would erode the nation’s fiscal health and burden future generations. Republicans who know better must resist this path.
President Trump released a tax reform framework Wednesday, promising that “historic tax relief” would result in higher wages and a “middle-class miracle.” That’s about as likely as it sounds. In fact, the plan is packed with giveaways to the wealthy and threatens to add even more to the debt.
Mr. Trump promises hefty tax cuts for ordinary people and little benefit to top earners such as himself. But because he refuses to release his own tax returns, Americans have no idea how much he would benefit from his own tax plan. Three major provisions suggest it would, in fact, do a lot for the wealthy.
First, it would create a special rate for so-called pass-through corporations, which, if not done carefully, could open a massive loophole in the tax code, leading to widespread tax avoidance among financiers, lawyers and people who can pay for savvy tax advice.
Second, the plan would eliminate the alternative minimum tax, which prevents wealthy people from ducking their tax bills. Mr. Trump’s leaked 2005 tax return showed he paid a hefty bill because of the alternative minimum tax a decade ago.
Third, the plan would end the estate tax, which would be a brazen giveaway to wealthy heirs. Only the richest of estates are subject to the tax, yet cutting it would blow a big hole in public finances. The plan would do this while promising uncertain benefits to ordinary people who work for a living. In a time of extreme wealth inequality, this is the last thing Congress needs to do.
And Republicans are not going to pay for these giveaways to the rich, which means future workers will pick up the tab. They have promised to raise money by cutting tax deductions, but they have been more specific about the deductions they would keep than the ones they would eliminate. They’ve done none of the hard work, in other words. Meanwhile, they admit they are unwilling to fully pay for the tax cuts they want, so they are giving themselves permission to cut up to $1.5 trillion in taxes without any offsets at all, arguing that a spurt of economic growth would make up for much of the lost revenue.
This is tax reform, in other words, for dishonest political cowards. It is not a legacy that members of Congress should want to leave to their children.