- - Monday, September 4, 2017

ANALYSIS/OPINION:

President Trump is a straight talker, and he’s talking tax cuts. In Missouri last week, talking up tax reform, he told an audience he wasn’t sure whether he should pronounce the name of the Show Me State as “Missouri” or, as the locals do, “Missouruh.” But taxpayers across the nation know that the proper pronounciation of “Washington” is “swamp.”

Congress has a rare opportunity to clean up the slang now by working with the president to lower taxes and disperse the goo that has been gumming up the gears in the great American economy for decades.

When the 115th Congress reopens Tuesday, tax reform should top its to-do list, right after enacting the $8 billion relief package to speed recovery of the Texas coast in the path of Hurricane Harvey. After that, repairing the economic harm done by an impenetrable tax code would do something about the 16 percent approval rating of Congress.

The president has put down four principles that undergird his reform: Make the tax system “simple, fair and easy to understand;” construct a competitive code that leads to more jobs and higher wages; provide tax relief for the middle class, and enact provisions in the law to encourage American companies to return trillions of dollars sheltered offshore. Mr. Trump proposes reducing the number of individual tax brackets from seven to three, with the highest rate cut from 39.6 percent to 35 percent, and is pushing to slash the corporate tax rate from its current 35 percent to 15 percent. This would put it in line with other major industrial nations.

The crucial question is whether the country can afford to reduce the corporate tax rate without making the deficit bigger. Queasy Republicans in the House favor a 20 percent rate, and predictably, Democrats bent on resistance to all things Trump vow to, well, resist.

“The president has repeatedly talked a good game when it comes to the working class,” says Senate Majority Leader Charles Schumer. “But just about everything he’s done has been to benefit wealthy special interests, adding to the burden of those in the middle class.”

Taking taxation to an extreme, in which workers are stripped of the benefit of their labor, is accurately called thievery, and in some places, like Mr. Schumer’s New York, federal, state and local taxes approach 50 percent.

Gary Cohn, the White House enonomic adviser, says Mr. Schumer has it backward: “As you simplify the tax system, you actually reduce taxes on middle class income payers and average Americans, and you’re actually taxing the higher end at a higher rate.”

Lower taxes mean workers can keep more fruit of their labor, giving them incentive to achieve and resulting in a larger revenues over the long haul. Simply the possibility of tax reform is already working as catnip for the economy, with the Commerce Department reporting an annualized growth rate of 3 percent during the second quarter, double the sluggish average of the Obama era.

With similar expansion over the next decade, Mr. Trump argues that the economy would create 12 million new jobs and $10 trillion in new economic activity, more than enough to offset lost tax revenue that critics warn would result from his tax cut plan.

Ronald Reagan found the sweet spot between lower tax rates and higher tax revenue in the 1980s, and the economy forged ahead by an average of 3.5 percent over his term. The only question is whether Congress will lift a lazy finger to make it happen again.

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