President Donald Trump’s proposed tax reform needs to be seen both in terms of its content and impact, and with regard to its prospects for passage into law in its current form, or in any form.
First of all, it looks like a rush job, cobbled together hurriedly to slip under the hundred-day timeline, without extensive consultation in Washington or anywhere else.
On the other hand, there is some sense to this approach since the bill will now be subject to assault and attempted modification by every member of Congress and lobbyist in America’s special interest-laden capital.
Its content has appeal to voters and to taxpayers. One element is that in its present form it is simple. The tax code has 70,000 pages. It would choke a horse and is loved only by those particularly benefited by it and by those who get paid to try to make sense of it for the taxpayer. The complexity of the arrangement by which Americans fund their behemoth of a government is one of the bases for a valid call for tax reform.
The second appeal of Trump’s proposal is that it constitutes major tax cuts for American companies and for some individual citizen taxpayers, tending toward high-income.
The corporate rate would be cut from 35 percent to 15 percent. This cut should serve as an incentive to American companies to keep at home or to shift their production and headquarters to our shores, as opposed to Ireland or the Cayman Islands.
The supposition that that will occur is, of course, the basis of the argument that the decreased government revenues resulting from the tax changes will not be shattering in terms of running up government deficits and pushing the national debt even further skyward.
Administration officials are pushing estimates that U.S. economic growth with the tax cuts will rise to 3 or 4 percent, as opposed to the present 2 percent. Some observers find this estimate dreamy.
As far as tax cuts for individuals, the new schedule will, in principle, contain three brackets: 35, 25 and 10 percent. The real estate interest and charitable contributions exemptions will be retained but other exemptions will be eliminated as will be the estate tax.
If the proposal is pursued, the ground of exemptions will become the dense forest within which lobbyists, legislators and administration officials will fight it out, campaign contributions flashing.
Many Republicans should like the tax cuts, but they surely will not like some of the cuts, particularly in defense expenditures, that will be necessary not to send budget deficits and the national debt, now reaching $20 trillion, into the great beyond.
There will be considerable grousing about the fact that as Trump announced the tax reform measure, he continued to refuse to release his own tax returns, despite the four-decade tradition of presidents making their tax returns public.
On the Democratic side, it is to be expected that some of them will be ready to fight and die to protect some of the “worthy” beneficiaries of current tax exemptions.
Trump’s plan is at most the opening gun in a long battle that may result one day in actual tax reform. We can be glad that Trump has broached the subject, given the need for reform, whatever his own reasons.