Tax reform by August? How President Trump can get it done
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Who really knows why the “Trump bounce” stalled out a bit in March. But one contributing factor is the increasing stock market nervousness about whether the GOP will deliver on tax reform. It's one of the party’s central promises to voters and after the strike out on ObamaCare repeal, investor confidence that the pols could deliver a tax cut was shaken for sure.

Business and markets need a firm reassurance this is going to happen. President TrumpDonald John TrumpTrump alludes to possible 2024 run in White House remarks Trump threatens to veto defense bill over tech liability shield Tiger King's attorney believes they're close to getting pardon from Trump MORE should be proactive. He should a demand a bill on his desk by August 1. He should announce to Americans that the effective date of the tax cut will be April 1 of this year ‎in order to get businesses spending and expanding now in anticipation of the tax cut.

He should focus on what is easily achievable and non-controversial. That is the business tax cut for corporations and small business owners. Tax rates here at home, the highest in the world, are sapping economic vitality and sending jobs across the oceans or across the border. Even Democrats acknowledge this.

Individual tax reform has great merit — and I've devoted 30 years to promoting improvements  like the flat tax — to our current 60,000 page monstrosity. But the chances of that happening this year seem remote. 

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Democrats have no interest in cutting tax rates in exchange for closing loopholes. That bipartisan consensus which existed in the Reagan years is gone, gone, gone. Very sad, but undeniable. Reagan would take 70 percent of the loaf when he couldn’t get Congress to give him all he wanted. It was one reason he racked up legislative victories. Trump should learn from that.

 

A bipartisan deal can be reached on business tax reform. Lowering the rates can very possibly bring in more revenues and it will surely mean more jobs and factories located here. The 10 percent repatriation tax that Trump has suggested could bring $1 trillion of additional capital back home.

The sweetener for Democrats is infrastructure spending. It is what the industrial and building unions want most. Trump should create an infrastructure fund financed through the tax money raised from repatriation with the money dedicated to rebuilding America’s roads, highways, airports, pipelines, and modernizing the electric grid and broadband access. As much as possible, this bill should facilitate private infrastructure, such as pipeline permits.

If the Charles SchumerChuck SchumerMcConnell: COVID-19 relief will be added to omnibus spending package Overnight Health Care: Moderna to apply for emergency use authorization for COVID-19 vaccine candidate | Hospitals brace for COVID-19 surge | US more than doubles highest number of monthly COVID-19 cases The five biggest challenges facing President-elect Biden MORE ‎Democrats as a bloc still won't play ball and work on this compromise proposal, it will expose them as the party of “no” and the agents of partisan gridlock that good government liberals say they deplore.

Finally, Republicans should drop the infatuation with “revenue neutrality.” President Obama wasn’t constrained by deficit neutrality when he spent $830 billion on make-work programs and welfare expansions in 2009. Why should the GOP be so constrained? Jobs are still by far the leading issue for the American people, especially in those midwestern battleground states that Trump won in November.

I believe that this will increase the budget deficit in the short term, but in the medium and long term it will increase revenues by putting more people into jobs and reducing the need for social spending. In the late 1990s the budget was balanced through budget discipline, a roaring stock market (thanks in part to the capital gains tax cut in 1997) and strong economic growth which created a tidal wave of unexpected revenue.

In 2016, the economy grew at about a 1.8 percent clip. The deficit will never get lower with anemic growth like that. But get to 4 percent growth and at least $3 trillion of the deficit vanished over the coming decade.

Trump needs a tax cut victory, and he needs it sooner rather than later. He should cut business taxes now and then take home tax reform in 2018. The deadline is the congressional summer vacation. Trump should insist that there is no recess until this gets done for American workers.

Stephen Moore is an economic consultant with Freedom Works and the distinguished visiting fellow for the Project for Economic Growth at The Heritage Foundation. He served as an economic advisor to Donald Trump’s 2016 presidential campaign.


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