For generations, Republicans have dreamed of fundamental, sweeping reform to the country’s burdensome and labyrinthine tax code. Under President Trump’s brief, but dramatic, new plan, they just might get it.
Anchoring the proposal is a 15 percent flat business rate, applicable to everything from small businesses to big corporate concerns, and, on the personal side, a wipeout of itemized deductions except for mortgage interest and charitable giving, in exchange for twice the standard deduction and a reduction of brackets to just three: 10 percent, 25 percent and 35 percent.
Democrats have been equally diligent in recent decades in deriding GOP proposals as no more than handouts for wealthy individuals and moneyed interests.
The Trump plan is clearly designed to attract the support of a fair swath of the current code’s uppermost echelons. If it passes into law, the estate tax will be gone, and so-called pass-through entities like hedge funds would enjoy nearly a 5 percent tax cut.
But the plan is also distinctly designed around working families. A couple’s first $24,000 of income would be spared the taxman altogether, while the burdens of child care costs would be (in some way) given greater relief.
Hoping to move quickly, the administration has supplied only an outline of the plan, aiming to get the kinks worked out in the negotiating and legislating phases. While that immediately opened White House officials to familiar attacks from the left, the early criticism is already in danger of going too far.
“If, in fact, the proposal cuts taxes but fails to close loopholes or raise some other taxes, it would not be a true reform of the tax code,” the New York Times reported.
But sweeping reform that includes some targeted rate hikes would probably be the kind of overhaul to appeal most broadly to American voters — some of whom believe that higher earners enjoy too many entitlements with too little to pay on tax day, and others who simply do not believe that supply-side economics squares with fiscal responsibility as much as certain Republicans have long insisted.
Few families and individuals have the time, energy and resources to game today’s complex tax code as thoroughly and advantageously as the richest and their business entities. Few prefer itemized deductions to a simpler and lower basic rate.
Meanwhile, wealthier Americans who save big money by paying tax experts to work the system will find little support for shelter from a straightforward bracket system.
That leaves budgetary scoring. Over the years, fiscal responsibility has become a convenient brush for Democrats and Republicans looking for a nonpartisan way to tar opponents’ plans. Without spurring some substantial growth, Trump’s tax plan will probably worsen what’s broadly considered a fairly unsatisfactory budget picture.
But Americans are probably ready to accept more of an up-front fiscal downside if it comes with moderate, sustainable growth — like the 3 percent GDP number Treasury Secretary Steven Mnuchin has reasonably floated.
Critics portraying Trump’s plan as too sweeping and simple are on the wrong page. Sweeping, simple reforms are just what taxpayers want and deserve.
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