Here's something Trump said he would do.

Posted on: April 11, 2017 at 08:10:57 CT

Will he? No, I don't think so. But he is good at talking about it. At least simplify the insanely indecipherable code, with instructions that often are not clear. And take care of the main problem - reduce spending. Will he? No, I don't think so.


Never Mind The Gimmicks, We Need Real Tax Reform

President Trump says he's starting over with tax reform. Given Congress' failure to repeal ObamaCare, the biggest tax hike ever, that might be a good idea. But Trump and the other reformers need to remember: Just as with ObamaCare, not just any tax reform will do.

Quoting "White House aides," Fox News reports that Trump "has gone back to the drawing board on tax reform as he looks for wide-ranging Republican support behind legislation to overhaul the tax system."

We've heard that the White House has put everything on the table when it comes to tax reform — including a possible European-style value-added tax (VAT) or even a carbon tax.

Another plan supposedly being discussed would create a VAT-like tax for corporations by cutting the corporate tax rate and imposing a border tax on imports, while eliminating the corporate deduction of labor expenses. This, according to the Fox report, would generate an astonishing $12 trillion in revenue over 10 years. That money would be used to get rid of the 12.4% payroll tax, giving both workers and businesses a big tax break.

As an example, a worker now earning $60,000 a year would get a tax break worth about $3,720 a year in added take-home pay. That's a big tax cut.

Sure, it's an intriguing idea. But all this spitballing and tax-cut make-believe leave us feeling a little uneasy, since we have serious problems with tax-reform ideas that merely change how we're taxed, without improving the tax system as a whole.

The tax code is no place for gimmicky faux "reforms" or grand political bargains that would only add to the overall tax burden, make the code even more complex and in the end make it easier on future Congresses to raise taxes, as all of the ideas above, including a carbon tax and a VAT, would do.

For the record, we were disappointed to see that Trump has apparently abandoned the tax reform he advocated while running for president last year.

It included across-the-board income tax cuts; a reduction in the number of brackets from seven to just three; steep cuts in corporate tax rates, including a one-time, ultralow 10% rate on the $2.6 trillion in corporate cash now stashed overseas; deduction of child care spending from taxes; an end to the death tax; and broad moves to deregulate the economy, especially energy — which Trump is now doing.

Oh yes, and repeal and replace ObamaCare.

As we noted last August, "Much of (Trump's) program consists of powerful pro-growth supply-side policies that have worked before — and would work again, if given a chance." We still feel that way, though we realize that even congressional Republicans are split on reform.

That would have been a heck of a tax reform, but sadly now it appears to be dead. So what should replace it?

Well, all the gimmicks aside, it's the principles behind any tax reform that really matter, and these are the principles that matter most: Taxes should be flatter, lower and fairer for all Americans. Everyone should pay some tax, even if it's just a little, to have skin in the game. And our tax code should distort market-based economic activity as little as possible, while maximizing economic growth and employment.

On a practical level, that means we need to stop punishing corporations with a 35% tax rate — now the highest in the 34-nation OECD — which discourages capital formation (that is, investment) and hiring. We need to simplify personal taxes and reduce the 40% top tax rate dramatically, along with rates on everyone else, to encourage work and entrepreneurship. And we need to reduce the number of deductions.

As for those who wonder how we will "pay" for all these tax cuts, well, one way is to reduce the size and scope of our federal government, which now plays far too big a role in our private lives and the economy. One major way to do this is to reform those parts of government that are growing most rapidly, namely entitlements.

Finally, contrary to what some on the left might say, principled tax reforms will bring a flood of economic growth. Eventually, that means more revenue, not less. As economist Larry Kudlow suggests, major tax reform could bring inasmuch as $4.5 trillion in added revenues over a decade.

Increased economic growth always follows major supply-side tax reforms. Always. If we cut taxes, reduce future spending and deregulate, tax reform will indeed pay for itself. And America will again be a land of growth and opportunity.