A win on taxes would surely salvage Trump’s reputation as a deal-maker
Tax reform at last
The last time this nation engaged in a major reform of its tax code, Ronald Reagan was in the White House, “Dynasty” and “Cheers” were hits on TV and “cell” phones were the size (and weight) of a paving brick.
Yes, a lot has changed since then, much of it for the better. But imagine the change — the unleashing of economic development — that yet another long overdue overhaul of the federal tax code could accomplish.
What was introduced this week in a speech by the president and in separate announcements from Republican congressional leaders was what they all termed the “Unified Tax Reform Framework” — emphasis on the “framework” part.
It is basically an outline — and that’s not such a bad thing. Every major proposal has to start somewhere. The guiding principles are that the tax code should be simpler, easier to understand for individual tax filers and it should make this country a more desirable place for corporations to do business, bringing back those companies that have fled these shores for more competitive environments.
The outline provided by the Trump administration this week makes a good start on all of that. It would double the standard deduction — a boon to the middle class. It would reduce the current seven tax brackets to three and lower the top one from 39.5 percent to 35 percent (with the possibility of one more bracket for as yet undefined wealthier Americans). It would also preserve America’s favorite tax deductions — the mortgage and charitable deductions — but do away with the deduction for state and local taxes, so yes those of us in a high tax state like Massachusetts could take a hit.
It also eliminates the much despised estate tax.
It sets a new maximum tax rate for small and family-owned businesses — the prime generators of new jobs in this country which are currently taxed at the individual rate — of 25 percent. And it reduces the corporate tax rate from its current onerous 35 percent to an internationally competitive 20 percent.
Sure, there are lots of moving parts — every deduction, every “loophole” in the tax code is there because it has some kind of constituency. Those constituencies will not go down without a fight.
Of course, no one wants to talk about the price tag just yet. Some experts estimate it could reduce government revenues by $5 trillion over the next decade but with anticipated economic growth would add some $1.5 trillion to the deficit. And there is surely a case to be made that putting money back into the pockets of the people who earned it will stimulate the economy, just as taxing corporations fairly will encourage job creation.
What it will ultimately come down to is politics — as things always do in Washington. Congressional Republicans have given ample evidence that they are too willing to let the perfect become the enemy of the good. Deficit hawks will have a problem with this one.
And President Trump would be wise to continue his outreach to Democrats, especially that most endangered species, moderate Democrats. He will need them, if only to keep his own party members in line.
A win on taxes would surely salvage Trump’s reputation as a deal-maker. But more importantly it would be good for the nation.
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