With John McCainJohn Sidney McCainBiden falters in pledge to strengthen US alliances 20 years after 9/11, US foreign policy still struggles for balance What the chaos in Afghanistan can remind us about the importance of protecting democracy at home MORE’s “conscience” apparently deciding that ObamaCare should remain the law of the land, tax reform has become a must if the Republican-led Congress has any hopes of putting legislation on President Trump’s desk before the end of the year.
That said, many questions remain about what the Trump tax plan looks like and what should or should not be included in the tax proposal. Many an idealistic economic stimulus plan — and that is what the Trump plan is intended to achieve — have died the death of a thousand cuts on Capitol Hill due to over complexity, underwhelming policies, and political infighting and sand in the gears from special interests.
First, cut the taxes. We know that White House wants to cut the corporate tax rate — the highest rate in the world — from 35 percent to something south of 20 percent. For almost a decade, corporate interests in Washington, from individual companies to the influential behemoths (the U.S. Chamber of Commerce and the Business Roundtable) have advocated for some form of corporate cut to about 23 percent, the international average. Many of us want 15 percent, but most will settle for 20 percent.
Whatever the rate, the environment has not been better for a corporate tax cut. Job growth and economic optimism among the public, matched to what a corporate rate cut could mean for future job growth, investment in communities by businesses, and global competitiveness, hasn’t been as aligned as it is today. The White House and Republicans in the House and Senate must move quickly to take advantage.
Second, as well as cutting the overall corporate rate, it’s just as important, if not more so, to give small businesses the same kind of tax advantages their far larger competitors have. Cutting the wildly disparate small-business tax rates and bringing some certainty to their tax rates would be a huge win for businesses and entrepreneurs across the country. Most family-owned small businesses are tied to the personal tax rate, and just a mildly successful business would find itself paying close to a 40 percent tax rate or even higher.
Cutting the rates and simplifying the tax code — beyond the regulatory red tape cutting that the Trump administration is already doing — would be huge boon to small businesses across the country. Since most of the jobs in this country are provided by small businesses, tax cuts and rolling back regulations for small business will unleash new job growth. There are strong indications that there is the potential for a 28-37 percent tax cut for small businesses: settle for 30 percent and move on.
Third, give the middle class a real tax cut. Let’s be clear, whether it’s the “top one percent” of earners here in the U.S., or the “top 20 percent,” we know who pays the bulk of taxes: the rich. Given the year and the state of the economy, the top one percent may pay as much as 50 percent of all taxes, and the top 20 percent may pay as much as 85 percent of all personal tax revenue.
But that doesn’t mean they all need a tax cut. But most households earning less than $500,000 per year should see a cut in their tax rate. Putting more cash in the pockets of the true middle class will stimulate the economy, the investment market, and perhaps even the housing market in some parts of the country. The initial indications are that deductions for a middle class married couple will double, meaning the first $24,000 would be tax free. This is a step in the right direction.
Fourth, get potential taxable revenue that is offshore back in U.S. coffers. When Democrats and progressives ask, “How will we pay for this plan?” a potential way is through the proposed tax holiday to repatriate corporate money from overseas. A Trump plan with a ten percent tax holiday to repatriate money from overseas would put anywhere from $260 to $400 billion in the federal government’s tax account. Those are funds that otherwise would not be collectable.
But if I were President Trump, I wouldn’t simply let that money be used to offset the cuts. He should work a deal with Congress: give him funding for the Wall which will fulfill a major campaign promise for him and potentially add 25,000 new jobs to the economy, and then let Congress fund whatever miserable special interest pork projects they want with some of the rest.
Finally, it’s imperative before President Trump embarks on this cross-country campaign for his economic growth and tax plan that the White House make clear what the core principles are for its tax plan that Congress will be drafting; perhaps not a fully fleshed out plan, but a simple four-page document that lays out the essentials of what must happen.
Democrats are counting on special interests and the mainstream media to throw sand in the gears in hopes that any Congressional-written tax plan will collapse under its weight and complexity. That doesn’t have to be the case.
Instead of sweeping and comprehensive tax reform, a clear, simple plan that cuts the taxes, simplifies the tax codes, and puts more money in federal coffers, while continuing to cut regulations on all citizens, will be a winning plan for the Trump administration and the American people.
Ned Ryun is a former presidential writer for George W. Bush and the founder and CEO of American Majority. You can find him on Twitter @nedryun.