‘The Republican tax bill hurtling through Congress is increasingly tilting the United States tax code to benefit wealthy Americans.” That’s the beginning of a 37-word first sentence in a stage-setting front-page story in the New York Times on the tax bill under consideration in the Senate this week.
It’s a nice illustration of creatively phrased advocacy journalism. “Hurtling” suggests irrational, uncontrolled, threatening movement; “tilting” suggests abandoning upstanding fairness; spelling out “the United States tax code” suggests an ominous attack on a respected national institution. And all this “to benefit wealthy Americans.”
Missing from the arguments of Republicans’ critics is acknowledgment that we already have what is, by most measures, the most progressive national tax system in the world. Other advanced countries tend to rely more heavily on regressive sales (value-added) taxes, and many have less steeply graduated income taxes.
Currently, the top 1 percent of earners account for about 40 percent of federal income-tax revenue; the next 9 percent provide about 30 percent more. You could make the system more progressive with more-progressive income-tax rates or by raising the amount of income subject to the payroll tax, but at the risk of redirecting high earners’ attention from productivity to tax avoidance. Such changes tend to reduce economic growth, just as tax cuts tend to increase it.
The Republican plan attacks two of the three largest “tax expenditures” by limiting or eliminating the deductions for home-mortgage interest and state and local taxes. The monetary benefits of this would largely come from “wealthy Americans,” especially in high-tax, high-housing-cost states, where they vote heavily Democratic. These progressive changes could only be made by Republicans, who have few House members and zero senators from such constituencies.
Sophisticated critics of the Republicans’ plan, such as former Treasury secretary Lawrence Summers, avoid arguing against any tax cut ever but say that with low unemployment and increasing growth, this is the wrong time — that economic policy should depend on the economic, not the political, calendar.
The problem with this argument is that the biggest cuts in the Republican plan would be to the corporate income-tax rate — from 35 percent to 20 percent. Today’s corporate rate is the highest of any advanced nation. It encourages multinational firms to park billions of dollars abroad rather than invest them here or to be merged into foreign-based rivals.
Moreover, economists of just about every stripe agree that the economic burden of the corporate tax falls on not just stock owners but also employees and consumers. The only disagreement is on who bears how much.
So there’s a widespread consensus for a corporate rate cut. Barack Obama proposed one in February 2012 but never got around to negotiating seriously with congressional Republicans. Republicans today are only acting responsibly, at the political risk of demagogic charges that rate cuts for corporations and unincorporated businesses paying as individuals would aid “wealthy Americans.”
Some critics focus on provisions fashioned to take advantage of budget procedures and Congressional Budget Office scoring rules mostly set in the 1970s. Both parties are guilty of gaming this increasingly dysfunctional system, especially the CBO’s wildly oscillating cost estimates of the Obamacare mandate.
As this is written, it’s not clear whether Senate majority leader Mitch McConnell can round up the needed 50 votes or, if he does, whether a conference committee will hammer out a version that can pass in the House, too. In any case, the Republican tax plan is something more serious and responsible than “hurtling” missiles “tilting” the tax code toward the “wealthy.”
– Michael Barone is a senior political analyst for the Washington Examiner, resident fellow at the American Enterprise Institute and longtime co-author of The Almanac of American Politics. © 2017 Creators.com.