OPINION | Newt Gingrich: Tax cuts — not reform — will allow the GOP to fight another day


As Republicans in Congress shift their attention to taxes, they must remember that tax cuts are far more important — and easier to pass — than tax reforms.

Tax cuts are popular, easy to explain back home, and will immediately spur economic growth. Tax reforms, on the other hand, almost always provoke opposition from affected industries or interest groups, are often too complicated to discuss and defend at townhall meetings or in the media, and they can take years to benefit the economy.

{mosads}Now, I agree the tax code is too complex, it’s riddled with unnecessary and unfair loopholes, and it needs to be reformed. I am in favor of passing any tax reforms that we can easily pass now, then making larger reforms later from a position of strength. No doubt, accomplishing comprehensive tax reform would be a grand slam for Republicans — but the GOP can also score runs by hitting a series of singles and doubles.

Pushing for complicated tax reforms over simple, widely-supported tax cuts at this point puts the entire effort at risk — as well as the Republican majority in 2018.

I have suggested a very simple framework for a tax cut bill that is retroactive to January 1, 2017. It should be called the “American Jobs and Economic Growth Act of 2017” — and it needs to be signed into law by Thanksgiving.

First, the tax cuts must be deficit neutral rather than revenue neutral. This way, we can pay for the tax cuts with spending reductions and new non-tax revenue generated from sources such as selling off unused federal property or leasing federal lands for natural resource development. In contrast, if Republicans adhere to revenue neutrality, they will only be able to lower taxes for one group by raising them for another. This would doom the bill.

Second, the bill should make America’s corporate tax rate competitive and include a pass-through rate for small businesses.

As I explained in my new book “Understanding Trump,” Tax Foundation reports show the United States’ 38.92 percent business tax rate is the highest in the developed world — and the third highest globally. Meanwhile, the Foundation reported the average rate in Europe is 18.8 percent. The U.S. business tax rate should be slashed to 15 percent, which would immediately allow the United States to attract new businesses and create more jobs at home.

This rate must also be available to S Corporations and small businesses, which account for 99.7 percent of the employers in the United States. Allowing small business owners to pay the 15 percent tax rate for the first $250,000 of their business profits (as an example) would allow them to reinvest in and grow their businesses. This would also make it easier for entrepreneurs to start new businesses.

The third piece of the American Jobs and Economic Growth Act includes substantial tax breaks for the poor and middle class through a dramatic increase in the standard deduction, significant cuts to the marginal rates, or a combination of both. This will help Americans keep more of their money, which they can use to save for retirement, pay debts, or invest — all of which grow the economy.

The final part of the simple tax cut bill is to provide a consistent way for U.S.-based multinational corporations to repatriate earnings from overseas. American companies reportedly have more than $2.5 trillion in foreign earnings being kept outside of the United States. This is because our current system makes it less expensive, and therefore more beneficial, to reinvest anywhere but the United States. Bringing this money home (and taxing it at the newly-lowered 15 percent rate) would bring $2.1 trillion to the U.S. economy and $375 billion in new federal revenue.

Combined, these measures would immediately create jobs, put money in Americans’ wallets, and catapult our country into a new era of prosperity. They are easy to promote and hard to refute.

What Democrat wants to tell his or her constituents they shouldn’t get a tax cut? How will liberals explain that making it easier to start and run a business in America is a bad idea? My guess is they won’t. If Republicans craft simple, popular tax cut legislation, they will pass the bill with a large bipartisan majority.

But if the Republican tax effort gets mired in debate over complicated reforms, this majority will dwindle and deteriorate, and the bill will not be passed by Thanksgiving — or even this year. Such a failure could cost House Republicans the majority in 2018.

So, I suggest Republicans apply a simple test to determine what provisions should be included in the 2017 tax cut legislation: “Is this reform more important than keeping the speaker’s gavel away from Nancy Pelosi?”

I suspect the most frequent answer will be: “No, this reform can wait.”

Newt Gingrich is a former Speaker of the House of Representatives.

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


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