Editorial: Keep tax cuts simple

Published on Friday, 1 September 2017 11:04 - Written by

Economist Stephen Moore has some good advice for Congress as it responds to President Trump’s call for tax reform: Keep it simple. Americans spend far too much time and money navigating the needlessly complex tax code. Simplification could spur as much economic growth as a tax cut.

But it’s not just the tax code that must be simplified, Moore says. The GOP’s message should be simple, as well.

“One of the most enduring lessons from the Obamacare fiasco is that to win a political battle, it is best to keep the message simple,” Moore writes for The Hill. “If there are too many moving parts to a plan, if Americans don’t understand what the politicians are doing, or if there are parts of a bill they don’t like, it probably will go down in flames. Most people don’t like Obamacare, but when they couldn’t understand the Republican alternative, they chose the devil they knew ‎versus the devil they didn’t. This brings us to the tax cut fight.”

Congress must focus on three key points, Moore contends.

“First, cut tax rates for large and small businesses to 15 percent to make America competitive and create jobs,” he writes. “Second, repatriate $2.5 trillion of money held by American companies back to the United States at a 10 percent tax rate. Third, double the standard deduction for every family and individual tax filer. And that’s it. Hard stop. No border tax. No carbon tax. No surtax on rich people. No end of popular tax deductions. ‎You can’t get the tax base broadened without a single Democratic vote helping you do it, so don’t try to roll this boulder up the hill.”

Congress could present tax reform as a jobs bill. And they would be right. The business tax cut would mean money can be reinvested in workers - new and existing.

“The business tax cut is, as my friend Larry Kudlow often preaches, ‘a middle class’ tax cut,” Moore explains. “As even the not-so-friendly Congressional Budget Office (CBO) recently concluded, more than 60 percent of the gain from a business tax cut goes to workers in the form of higher wages. As for the ‘cost’ of the tax cut, growth of the economy is a precondition to getting the debt down.”

In other words, Congress shouldn’t fall for the demand from Democrats that any tax cuts must be offset by other tax increases, in order to be revenue-neutral. Democrats don’t demand that of themselves, after all.

“Republicans are first and foremost a tax-cutting party,” Moore contends. “President Trump himself has said it will be ‘the biggest tax cut since Reagan.’ Revenue neutrality is a bad idea that will kill tax reform. If one person’s taxes go up to pay for someone else’s to go down, there’s not much economic gain and the loser is going to make a lot more noise than the winner. With a simple tax cut, everyone wins.”

History is on the GOP’s side. Tax cuts and tax simplification create jobs and grow the economy.