- - Tuesday, December 19, 2017


When Ronald Reagan signed the 1986 Tax Reform Act into law a lot of those who worked hard to get it done looked at one another and asked, “What’s next?” Well, it took about 30 years, but we’re about to finally have the answer.

There’s a lot to like about the reform package that is proceeding in fits, bumps and starts and is expected to land on the president’s desk on Friday. Once the president signs it the United States will no longer have the highest corporate tax rate in the industrialized world. That should generate growth of the economy like nobody has seen in years, and should stop the flight of American companies to low-tax and cheap-labor destinations in the rest of the world. That would squelch Democratic talking points.

The House approved the $1.5 trillion (that’s with a ‘t,’ not just a ‘b’) tax-code rewrite on Tuesday, by a vote of 227 to 203, but the House of Representatives must vote again Wednesday to cross a ‘t’ and dot an errant ‘i’ left out of the legislation to satisfy an arcane rule in the Senate, which votes Thursday or Friday with only a Republican vote to spare. Vice President Mike Pence delayed a trip to the Middle East to be on hand to break a tie vote, if there is one.

Most of the new tax rates are lower, the standard deduction has been doubled, and the code has been simplified considerably. That’s still not enough because, somewhere between 1986 and now, the Republicans got lost in the weeds.

It was probably when President George H.W. Bush announced that tax increases were on the table. This was after his famous “read my lips” promise that he would absolutely, positively never, ever raise taxes, no matter what. When he did, however, this put things back where they had been before Mr. Reagan arrived.

Before that the argument over taxes and spending was dominated by green-eyeshade types who believed revenues and spending had to be balanced. “Root-canal economics,” some called it. Mr. Reagan was right when he said, “government is too big and its spends too much” but, until the Clinton-Gingrich budget deals after 1994 brought things into balance, the Grand Old Party was always looking for an opportunity to be not so grand.

The fact that the 2017 deal on taxes was written with the idea that it would not lead appreciably to an increase in the deficit is a sign that such thinking is alive and well on Capitol Hill. Politicians prefer to spend money whether they have the money to spend, so the concern about debt and deficits suggests that big talk will continue to be the favorite sport on the Hill.

The focus now must be on growth significant enough to bring the total U.S. debt, now equal to about a year’s gross domestic product, down to a level that, as a percentage of the GDP, it can be dealt with by holding the line on spending increases.

There’s a lot to be done. The tax rate is not flat across the board, for instance. There should be time to celebrate a victory over Christmas, assuming all goes well (which it often doesn’t), but moving quickly to the next phase is important. If there’s the growth the nation has been promised, there must be more money put in the private economy and the government must get by on less. The congressional leadership must lead in that direction or get out of the way. Replacements will be available.

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