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Tax Reform Is a Trap – Avoid It!

by Teapot Harding (Principles: Shrinking Government) - 11 month ago

Unfortunately, now is not the time for this bumbling Congress to tackle tax reform. Let’s handle easier parts of Trump's agenda now, and then do tax reform right in 2019.

When the bloated, idiotic, job-killing and wasteful U.S. tax code is finally reformed, no one will cheer louder than I. The tax code with its endless array of incentives to do what the government wants you to do, and punishments for when you don’t, is an abomination.   

I wish that now were the right time for Congress to tackle tax reform but alas, it is not. That joyful day when the tax code can fit on a post card will have to wait.

To think that a Congress which has spent 6 months bumbling unsuccessfully to try and pass a health care bill is suddenly going to come together and pass tax reform is beyond wishful thinking. After repealing Obamacare 50 times when it didn’t count, they lost their nerve and weren’t willing to compromise when it did count.  Why would anyone think that tax reform will be any different?

Actually, tax reform will be harder. Tax cuts are relatively easy but to really simplify the tax code and keep the law “revenue neutral”, they also need to cut tax deductions. Name a deduction and there is a well-funded lobby that will come out of the woodwork to defend it. Thus, instead of facing unruly groups of penniless Medicaid patients at Town Halls, Congressmen will face organized revolts, and the loss of funding, by their largest corporate donors.  The result will be that we will waste another 6, or 9 months without anything getting done.

We will then already be well into 2018 and the midterm election campaign will begin with no substantive accomplishments to boast about, As a result, Republicans will be easy pickings for Democrats. A Democratic takeover of either house of Congress in 2018 will force the President to start working with Democrats and that will be the end of our Conservative dream of finally shrinking the government.

I have a better idea. Let’s do some of the easier things now, build momentum for 2018 and tackle both tax reform and health care in 2019 after we have held the House and increased our majority in the Senate. That doesn’t mean we completely ignore taxes now For example, we can cut the Corporate tax rate without getting into a major tax reform fight. Lower corporate taxes will benefit everyone by immediately bringing back jobs to America and keeping them here.  However, the more controversial stuff should be set aside for another time.

So our choice is clear. We can try to do tax reform now and probably fail. Even if we succeed, the Democrats will demagogue our success as a giveaway to the rich. Either way, our majority in Congress is at risk in 2018. Alternatively, we can focus on passing a budget that will Make America Great Again and dare the Democrats to oppose us on popular items like infrastructure, rebuilding the military and strengthening the borders.

I’ve waited this long. I can wait until 2019 to celebrate true tax reform. 

Comments and Responses (2)

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By  Cool Calvin - 12 month ago
You do make an important point. Our President is not going to wait forever for the Republicans in Congress to start behaving like grown-ups. However, methinks you're hitting the old panic button just a tad too soon. No one knows the loopholes in the tax code better than President Trump and he is going to make sure that they are cleaned up. Perhaps he expected too much from Congress in leaving health care in their hands but with tax reform, the White House has been hard at work for months getting a plan together. It will be a great plan and all Republicans, and maybe even some Democrats will unite behind it. When it happens, will you invite me to your celebration?
Discussion Leader's Response : This comment is relevant to the discussion. (Commenter's rating is increased.)
Discussion Leader's Explanation : Sure. You're invited. I truly hope I'm wrong about this but I don't think so. Republicans are talking big again just like they did before they ran into health care wall and I fear they're going to hit another wall. You're right that the administration is taking a more active role but the numbers just don't work out. For a corporate tax cut to attract businesses to the U.S., it has to be permanent. However, unless they find a way to pay for it, they're only allowed to keep it for 10 years. They probably could find ways to pay for the corporate tax cut but then they can't reform the rest of the tax code. I know you think Trump is a genius but these are details that he leaves to others. So they have a choice, a 10 year tax cut which Democrats will pan as favoring the wealthy or a massive tax reform with Republicans taking courageous positions on tax breaks. I suspect it will be Plan A with Democrats winning the House in 2018.
General Comments
By  Paul Revere - 12 month ago
Which tax deductions are you refering too? I think a real legitimate attempt to clean up the tax code and close loopholes will be welcomed bipartisanly, but will hurt the pension and accounting industry .
Discussion Leader's Response : This comment is relevant to the discussion. (Commenter's rating is increased.)
Discussion Leader's Explanation : One person's loophole is another person's lifeline. For example, teachers are allowed to take a tax deduction for up to $250 of out-of-pocket expenses for items they purchase for their classrooms. Do you want to take that away? There are tax breaks for farmers, for oil companies, for people who rent houses, for people who rent houses to other people, etc. etc. You are correct that companies can deduct contributions for Pension Plans but they also take a tax deduction for amounts they spend on their employees' health insurance. Should that be taken away? If our politicians had the nerve to get rid of all of these deductions, they would be able to lower taxes by enough so that the teacher who spends $250 comes out ahead. That's what I'd like to see. However, a courageous politician is either an oxymoron or a soon-to-be-unemployed politician.