- - Friday, April 21, 2017


Tax reform is one of the big ticket items on the Republican Party’s wish list for this year. President Trump supports overhauling America’s tax code. House Speaker Paul Ryan outlined tax reform as a major step in his “A Better Way” blueprint.

Tax reform has been a spectacular success in the past, when it was done right.  In the 1960’s, President Kennedy cut taxes and the economy soared.  In the 1980’s, President Reagan cut taxes and the economy took off.  In the early 2000’s, the Bush tax cuts pulled the nation out of the Clinton recession.

Unfortunately, the current plans for “Tax Reform” don’t really include meaningful tax cuts. 

Yes, the plan will reduce certain taxes.  But the problem is the Republicans want any tax reform to be “revenue neutral.”  In plain, non-politician English, that means that for every tax cut made, there has to be a corresponding tax increase!

There is another name for this concept. It is called rearranging deck chairs on the Titanic.

Simply changing who pays taxes without cutting the actual tax burden is insanity.

The Border Adjustment Tax is a classic example of insanity.  It is a part of the proposed tax reform package.  The idea of the Border Adjustment Tax (or BAT) is simple. Imports are to be taxed as they come into the country. This will make imports more expensive than domestically produced items. This ignores the fact that some imported items cannot be easily replaced by domestically produced items and it also ignores the fact that the cost of this tax is simply passed along to the consumer.

The BAT is supposed to raise $1 trillion in revenue, to offset other tax cuts.   

That is the problem. Instead of cutting tax revenue coming into the government, the Republicans are looking for offsets.

What the Republicans should be looking for is ways to cut spending so that the government does not need that much money.  Since the government’s fiscal year began in October, the government has brought in approximately $695,391,000,000.00 in revenue from individual income and payroll taxes.  That figure does not include corporate and other taxes.

What is not being done in the Better Way plan is spending is not being cut.  President Trump wants to spend a $1 trillion on infrastructure.  President Trump also wants to ramp up military spending and the military desperately needs that after 8 years of intentional neglect during the Obama Regime.  Two thirds of Navy fighter aircraft are grounded now because of parts shortages or needed maintenance.  The navy needs new ships. The Air Force is still flying front line aircraft made in the 1950’s.  Only one-third of Army combat brigades are capable of combat right now.

The problem is entitlement spending is out of control and the Republicans are too afraid to touch this issue. Of a roughly $4.5 trillion dollar budget, $3 trillion is spend on pensions, social security, Medicare and Medicaid.  Everything else, including the defense budget is being squeezed by this entitlement explosion.

Tax reform is desperately needed. But it cannot be a revenue neutral tax reform. Tax reform not only needs to simplify the tax code, but it needs to radically cut the revenue the government generates from taxes.  But tax reform only works if there is spending reform in Washington as well.

For if tax reform is not accompanied by spending reform, then government will continue to grow to unsustainable levels.  And real Americans will continue to pay for the endless expansion of government.

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