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What does tax reform mean?

The much shorter tax reform memo released by the White House in April is easier to digest but even less helpful

   

The Week | By Matthew Walther

President Trump is not going to sign a tax reform bill into law this year.

After all, the Republican Party in Congress is staggeringly incompetent and recklessly short-sighted. There is very little discipline. Morale at times appears almost non-existent. It is hard to know whether Senate Majority Leader Mitch McConnell really believes his own words when he says that he expects to see tax reform pass “sometime this year.” Only a few months ago he claimed to be equally confident about the likelihood of repealing and replacing the Affordable Care Act, a prospect that even now is as remote as it was at the beginning of President Obama’s second term — probably even more so, now that people who have benefited from the expansion of Medicaid have been receiving care for what will soon be a decade.

But tax reform is an ever more complicated venture than what was — barring the passage of a Medicare-for-all single-payer plan — always going to amount to mere tinkering with the existing machinery of ObamaCare. There is no clear consensus in Republican ranks about what meaningful tax reform would even mean. The cliché that our federal tax code is “broken” is repeated endlessly. What does this mean? Right now it exists only at the level of a vague intuition, as a slogan useful during elections. In what sense is it broken? Who broke it? How can it be fixed?

Answering this would require being able to articulate a clear set of goals. What does the GOP actually hope to bring about? Simplification for its own sake? Fairness, however defined? Increased revenue? Economic growth? The 35-page policy paper released by the party last year, in which the word “broken” appears some 21 times, is not particularly illuminating, unless one is looking for confirmation that Republicans are only interested in making it easier for those who are already well off to amass further wealth. The no-doubt desperate, bureaucracy-ridden plight of those poor souls who appreciate capital gains from their own investments is not a pressing concern and would not be considered a serious priority by a party that cared about the millions of Americans who own no individual stock in any company and never will. A party interested in the well-being of the poor and the middle class would concentrate its efforts on take-home pay and shoring up things like the child tax credit from which people without Ameritrade accounts actually benefit.

The much shorter tax reform memo released by the White House in April is easier to digest but even less helpful. Among its numerous bullet-pointed “Goals for Tax Reform” are “Grow the economy and create millions of jobs.” I’m sure Sen. Chuck Schumer and the Democrats are minutes away from announcing that they are absolutely at odds with this goal and would much prefer an extended recession and massive unemployment.

But the priorities of those responsible for the memo (if not of Trump himself, whose views about this and other subjects are a kind of holy mystery) are clear enough: helping the rich get richer and hoping that everybody else enjoys doing a little less paperwork. Shrinking the number of tax brackets might sound elegant — three is a nice, simple, clean-sounding number, isn’t it? — but is it worth it at the expense of eliminating nearly all existing deductions except for the ones that the poorest Americans don’t benefit from, like mortgage interest and charitable contributions?

This is not, in any meaningful sense, tax reform. Serious pragmatically minded reformers would at least consider the possibility of imposing a financial transaction tax along the lines of the one proposed by Sen. Bernie Sanders (I-Vt.) during the 2016 election. Letting the feds take a cut of $100 on a $100,000 trade would not be a significant burden, but over the course of a decade it could raise nearly $200 billion. It is also time for the Republicans to articulate good reasons for opposing carbon taxes along the lines of those that exist in the not-exactly economies of Scandinavia — or just get on board with them.

These and many other pressing tax-related questions — what to do about the corporate rate, which nearly everyone agrees should be lowered — cannot be settled overnight. To attempt to do so would be moronic, and the results would probably look as arbitrary and capricious as the failed ObamaCare replacement bills did. Serious tax reform, like meaningful health-care legislation, will require a departure from many current conservative orthodoxies and a willingness to work with Democrats.

Does anyone really think this Republican Party is capable of this sort of self-reflection?

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This post originally appeared in The Week

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