GOP tax bills fall short of true reform
Everyone in Washington agrees that the federal tax system needs substantial reform.
The system infuriates with its complexity, warps economic decision-making and unreasonably favors some taxpayers over others. In addition, the tax system is out of sync with federal spending.
Unfortunately, the proposed tax overhaul legislation under consideration on Capitol Hill would fall far short of true reform.
The House and Senate bills have significant differences. Both tax bills would make things worse, with a bad legislative process leading to bad fiscal and economic policy.
Lawmakers and President Donald Trump want to finance large tax cuts with borrowed money. At the same time, they are pushing for new spending in areas such as defense and border security.
The federal debt, which rose above $20 trillion, is on an unsustainable path. The Congressional Budget Office estimates that Washington is on course to add more than $10 trillion to the debt over the next decade.
Under conventional budget scoring, the proposed tax “reform” plans would add roughly $1.5 trillion to the debt over 10 years. Some lawmakers say the plan would pay for itself by rapidly boosting economic growth but few economists are buying that argument.
The proposed overhaul would likely increase future deficits by more than $1.5 trillion over 10 years because the House and Senate bills include budget gimmicks designed to understate certain revenue losses.
For example, certain provisions would expire within a few years, making them look more affordable. But supporters are planning to seek renewal of these provisions down the road.
The legislation has been put together quickly behind closed doors, and congressional leaders and the president are pushing for speedy passage. This secrecy and haste leave little time for careful analysis and consideration.
In addition, there has been little effort at bipartisan discussion and cooperation. This means that some problems were overlooked and the views of many Americans on tax policy received little consideration as the legislation was drafted.
The legislation closes some loopholes and offers some proposals that deserve consideration. But the positives in the bills are not enough to offset the revenue lost through the proposed cuts.
From an economic perspective, the proposed legislation also falls short. It focuses more on short-term economic growth than on the longer term. Additional government borrowing would mean less money available for future private investment.
And the larger the federal debt, the higher interest rates the government may have to pay. In addition, higher debt may reduce the government’s ability to respond to future economic crises or other unexpected challenges. In any case, the argument for additional government stimulus of the economy is weak. The economic expansion continues, with a booming stock market and unemployment at remarkably low levels.
So the White House is in the odd position of both bragging about the economy and — when discussing tax cuts — lamenting it.
Congress and the president need to make a fresh start. They should be trying to improve the federal tax code, not make it worse. And they should be growing the economy, not growing federal deficits.
• Robert Bixby is executive director of The Concord Coalition, a nonpartisan advocate of greater fiscal responsibility in Washington