The worst possible outcome would be to change the rules twice. Many Democrats have suggested that they would be willing to “go off the cliff” and allow rates on everybody to rise, basically betting that once that happens Republicans will cave and retroactively restore the lower rates for everybody but “the rich.” This is an incredibly cynical strategy that disregards the damage it would cause to the economy. Rather than get bogged down in this game, we should rise above it and talk to the country about our plans for pro-growth tax reform.
We ask the tax code to do far too many things. You get credits for installing “green” appliances, driving politically correct cars, hiring people of certain ethnicities, producing the “right” kind of fuel, and the list goes on. Tax reform has to follow some simple rules: lower the rates, broaden the base, and reduce loopholes, deductions, and carve outs. The purpose of the tax code should be to collect revenues sufficient to fund the necessary functions of the federal government, not as a tool for bureaucratic social engineering.
Another key aspect of any tax reform package is revenue neutrality in the first year. If, as we have seen in the past, higher revenue flows in as a byproduct of pro-growth tax policies, that is great and would help improve the health of our national balance sheet. However, the goal of tax reform should be to free the American economy to be the best place in the world to do business, not to suck more money from the productive sectors and spit it out in the unproductive ones.
Problems often arise with thorny issues like this one because everybody comes to Congress hat in hand to explain why their deduction or their credit is absolutely essential. They usually have a good reason why everybody else’s is inefficient, unnecessary, or counterproductive, but somehow their particular carve out is a top national priority. We have to get rid of this way of thinking and go through each provision of the tax code and ask: is it worth sacrificing lower rates, simplicity, and fairness to protect this? If not, the break should go. The time for that process is not Christmas Eve; it should be done in the full light of day in a transparent, thoughtful process. A lame duck tax reform package would very likely be a bad deal for the taxpayers, and that is ultimately what matters.
Nunnelee is a member of the House Appropriations Committee.