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August 31 2017

Tax reform is Trump's chance to right his legacy's ship

via Washington Examiner
by Hadley Heath

You could say America has had a summer of discontent. No one is happy: Obamacare limps on. Extremist groups have grown violent. Thousands languish in addiction to opioid drugs. A hurricane ravages Texas and now Louisiana.

Americans could use some good news. In his Springfield, Mo., speech Wednesday, President Trump re-upped his promise to pursue comprehensive tax reform, which, if he can get it done, would be very good news for workers, businesses, and families.

Although Trump has signed 53 pieces of legislation and appointed a Supreme Court justice, he has yet to deliver on any of his big-ticket legislative items: healthcare, taxes, infrastructure, or a southern border wall. But it's early in his presidency yet.

Of all of these topics, tax reform may be the one with the most widespread public support. Trump outlined popular pieces of his tax plan again in Springfield: Eliminating most federal income tax deductions and loopholes (for the rich) has the support of 63 percent of Americans, according to Gallup. About 47 percent of people support the idea of reducing the number of tax brackets, with only 12 percent disagreeing. And Americans support eliminating the death tax 54 percent to 19 percent.

Tax policy isn't a very sexy topic; most people grow bored with the details pretty quickly. But the reality is that tax policy touches our lives in myriad ways, not just in the wages directly withheld from our paychecks or the forms we fill out each year. Tax policy, perhaps more so than any other area, influences our economic growth, our labor market, and our wages.

One example of this is the corporate tax rate. Trump put it simply: "Lower taxes on American businesses mean higher wages for American workers." Some people might not take the president's word for it, but he's right. It's difficult to compute the exact amount, but as an estimate, both the Congressional Budget Office and the Joint Committee on Taxation assume that workers indirectly pay 25 percent of all corporate tax dollars. Other economists put that percentage even higher. This means workers stand to benefit from lowering corporate taxes, which would boost wages.

Despite the fact that many Republicans and Democrats (including former President Barack Obama) have supported cutting corporate taxes, Americans remain divided: 38 percent support reducing the rate and 43 percent oppose. This represents an opportunity for Trump to connect the dots, to explain how corporate taxes don't just affect white-collar executives or shareholders, but also workers.

In his Springfield speech, Trump touted corporate tax reform as a way to keep America competitive with other countries. Indeed, the U.S. has the highest statutory corporate tax rate in the world, and some of the highest effective rates.

Trump closed his speech by asking what could be more bipartisan than letting American workers keep more of their hard-earned money. Of course, more jobs, higher wages, lower taxes, and a simpler, easier filing process should be benefits of tax reform that Americans across the political spectrum can embrace.

But it's easy to see how Democrats will position themselves against tax reform. They will try to turn this into a class-warfare, us-versus-them issue.

Rather than recognizing real benefits for American middle-income workers and families, Democrats will paint tax reform as a favor to the wealthy. The highest earners will almost necessarily see a tax reduction; after all, it is the highest earners who today pay the lion's share of federal income taxes. And many of those filers are small businesses who file via the individual code.

Rather than talking about American businesses, as Trump does, Democrats will consistently use the demonized word "corporations." They will continue, as they consistently do, to paint the economy as a zero-sum game where employers and employees are pitted against each other. This ignores that growth benefits everyone.

After a tough summer, let's hope that Americans are ready to focus on uniting behind good tax reform ideas rather than deepening our divisions. Trump and Congress seem ready to lead and eager to get tax reform done. Americans should welcome these long-awaited reforms, and look forward to the economic effects: more jobs, higher wages, and lower and simpler taxes across the board.

Hadley Heath Manning (@HadleyHeath) is a contributor to the Washington Examiner's Beltway Confidential blog. She is a senior policy analyst and director of policy at the Independent Women's Forum, and a Tony Blankley Fellow at the Steamboat Institute.

 
Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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