If the GOP whiffed on healthcare, expect the same on tax reform
© Greg Nash

After failing at their long-promised goal to repeal the taxes associated with ObamaCare, one has to wonder whether the Republican Party will succeed in implementing any tax reform at all. As William Gale of the Brookings Institution and Tax Policy Center told National Public Radio, “If Trump can’t line up support for healthcare, it’s going to be hard to see how he will be able to lead on tax reform.”

Don’t hold your breath on comprehensive tax reform

Tax reform under the current administration is unrealistic due in large part to the sheer volume of the tax code. The federal tax code is currently 74,608 pages long — and growing. There is little to no chance that significant shrinkage will occur in the near future. While it would be great if we could reduce the tax code to a single 8.5” by 11” piece of paper, that is clearly not going to happen any time soon.

With weak economic growth and record revenue intake, why would Beltway politicians want to make cutbacks? Even record revenue is not enough to cover the federal budget. That leaves us with two options: either cut government spending or raise taxes. However, the politicians who cut government spending are going to be portrayed as heartless human beings who do not care about those relying on government assistance.

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That leaves raising taxes, but on whom? President Obama told young voters that everyone would be better off if the rich paid more taxes. Yet Obama’s tax policies resulted in a stagnant economy that crippled opportunities for the up-and-coming millennial generation. Trump’s solution? Repeal ObamaCare and replace it with “something terrific,” but it is clear how that turned out.

 

What theoretically must happen for tax reform to occur?

For a real tax reform to be possible, Congress must establish either a flat income tax rate or a national sales tax. A progressive income tax, as the one Obama seemed to be alluding to when he said we would all be better off if the rich paid more, is contrary to America’s sense of liberty. Many Americans believe that being forced to pay more simply because you earn more is equitable to punishing productivity and success.

A flat tax, however, would do the opposite: reward the rich at the expense of lower-income workers. Hence the concept of a national sales tax, or “fair tax.” Under a fair tax reform, the income tax would be replaced by a national sales tax. The tax rate would be between 23 percent and 30 percent on all purchases. Individuals would then effectively be taxed based on what they spend as opposed to what they earn. With no income tax, the 74,608-page tax code would certainly be slimmed down — as would the Internal Revenue Service.

What really must happen for tax reform to occur?

In reality, what needs to happen for effective tax reform is for Republicans to take a stand. Younger generations advocate for handouts and fall for empty promises, but they fail to consider the long-term implications and accuse anyone who is for tax reform to be heartless. If they want to make substantial changes, Republicans need to take a stand and say, “No more handouts. Everyone is going to have to pay their fair share.”

Sen. Bernie SandersBernard (Bernie) SandersBernie Sanders mocks Trump: ‘He could change his mind tomorrow’ Sunday shows preview: Questions linger over Trump-Putin summit Bernie Sanders: Trump 'so tough' on child separations but not on Putin MORE (I-Vt.) once made the mistake of accusing our nation of being uncompassionate when he was advocating for more socialized medical care. In January, he claimed that our treatment of the poor and working class is “worse than virtually any other country on earth.” Sen. Rand PaulRandal (Rand) Howard PaulThe Hill's Morning Report — Trump and Congress at odds over Russia GOP leader blocks resolution backing intelligence community on Russia Rand Paul blocks Sanders's Russia resolution, calls it 'crazy hatred' against Trump MORE (R-Ky.) called him out on his narrow view, pointing out that “not only do we help each other within our own country… we give away more than the gross domestic product of most of these socialized countries around the world.”

A reality check on empty promises on tax reform

Without presenting a viable replacement, it should have come as no surprise that Trump’s promise to reform ObamaCare fell through. Empty promises might win fanfare and votes, but it doesn’t get legislation passed. We don’t need “something terrific.” Instead, we need a well thought out plan that will serve the entire country, and which the government can actually enact.

Chris Markowski (@ChrisMarko) is an author, investment banker, stock market analyst, and consumer advocate. He is the personality behind Watchdog on Wall Street and the founder of Markowski Investments.


The views expressed by contributors are their own and are not the views of The Hill.