ASCH: If Republicans aren’t careful, tax reform could end up like healthcare

Finding middle ground on the tax reform debate

op-ryan-courtesywikimediacommons

Speaker of the House Paul Ryan

Courtesy Wikimedia Commons

Ever since Republicans conceded defeat on the latest version of the health care bill, the caucus has shifted its focus to tax reform. The tax code, like Obamacare, has its flaws, and legitimate reform would be welcome for both. Unfortunately, instead of reaching a compromise, Republicans seem desperate to push through another incredibly unpopular policy. The details of this tax plan are currently dividing Republicans in Congress, and will most likely lead to another contentious battle to win votes in the face of near unanimous Democratic opposition. Even though Republicans have all the levers of power in Washington, they still need compromise to get things done. If the Republicans continue to go forward with their radical plan instead of compromising, it is America that will suffer. 

As it stands now, the Republican tax plan would be a huge windfall to the rich. Republicans are currently seeking to lower income taxes, while also getting rid of the alternative minimum tax and the estate tax. At the same time, the GOP tax plan will raise income taxes on the middle class and cut the corporate tax rate. To pay for this, the GOP will try to eliminate some tax deductions like the state tax deduction, while preserving others, though it is not clear which ones exactly are on the chopping block. The Republicans are also seeking to increase the standard deduction to $24,000 dollars. Republicans claim these policies would stimulate growth, but unfortunately, they could also substantially reduce government revenue and add to the deficit. 

From the details provided above, it is not hard to see why it would be difficult to pass tax reform like this. The problem with closing loopholes in the tax code is that every single one has its defenders. Republicans in blue states, which have higher taxes, will most likely go against any plan which eliminates the state tax deduction, though it is one of the main features offsetting the costs of the tax cut laid out in the plan. Another source of contention is the possibility that their growth projections could fail to meet expectations. This would result in a substantial increase to the national debt, which is a no-go for many fiscal conservatives. Unfortunately, just like with health care, Republicans are showing their inability to build consensus for the greater good of the country. Tax cuts for the rich should not be the only thing that Republicans focus on — everyday people would benefit enormously from legitimate tax reform if a compromise plan could be found.

Instead of passing a tax reform plan that only benefits the wealthiest among us, Republicans in Congress should try to pass real tax reform that has a chance at bipartisan support. This could come in the form of a revenue neutral corporate tax cut, which would eliminate deductions while lowering the rate. Republicans could also cut payroll taxes and offset that by raising the cap on the amount of income subject to the payroll tax. When it comes to loopholes, the GOP should eliminate the mortgage interest deduction as well as close the carried interest loophole. Even though a full elimination would be unwise, a cap on the amount of money that could be deducted for state tax deduction would be a reasonable compromise. Republicans could also raise revenue by introducing a national internet sales tax. This revenue could be used to pay down the debt and expand the earned income tax credit, helping millions of people. All this tinkering with the tax code can be done in conjunction with a drive to make the tax code easier for everyday Americans to understand. While these ideas are nothing like the tax plan the GOP has proposed, they are necessary compromises that would help most Americans. 

When seeking to reform a huge section of our economy or government, compromise is key. By wasting time on radical plans that have no chance at reaching any sort of consensus, lawmakers are doing a disservice to our country. Instead of passing a huge tax cut like this, Republicans should show that they can get things done for a change and seek bipartisan support. President Ronald Reagan did this when he made the biggest change to the tax code since the adoption of the income tax. Big overhauls like this should happen with compromise, otherwise they are doomed to fail. Republicans should learn their lessons from the health care debacle and go back to the drawing board to come up with a better, bipartisan plan. That is what the American people want and what our representatives should do. 

Jacob Asch is an Opinion columnist for The Cavalier Daily. He can be reached at j.asch@cavalierdaily.com

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