It was going to be so easy - total control of the White House, Congress, and a packed Supreme Court to boot. Pesky Democrats could no longer get in the way. Repeal of "Obamacare" that the Republicans have been bellering about for seven years would be accomplished on Trump's first day in office.
For seven years, with the aid of the slothful media, Republicans hammered Democrats on health care. After seven years of bombast and seven months in control, the hollowness, and heartlessness, of the Republican agenda is revealed. Feeble attempts of Republicans to blame Democrats for failure rings hollow. The supine, inarticulate Democrats had nothing to do with Republican failure. It was simply a matter of Republican incompetence and malfeasance. They never had a plan. President Trump is too obtuse to have observed that the President must lead and sell controversial legislation if he expects congress to enact it.
And whaddaya know, even the out-of-touch broadcast media, including sleep-walking NPR, finally discovered, and were willing to publicize, testimonials of people that depended on "Obamacare," owing their lives and financial solvency to legislation that Republicans hated.
With Trump acting as if he were first to discover the complexity of health care policy, and congressional Republicans revealing the hollowness of their agenda, they agree - let's move on to the "easy stuff," tax reform.
Wall Street and corporate America salivate like a bunch of Pavlov's dogs at the mere mention of tax cuts. Their sycophants in the media, and even some Democrats, agree that "tax reform" is urgently needed. But just a minute - are we talking about tax cuts, or tax reform? And just what constitutes "reform?"
The ideological right wing asserts that tax cuts, pure and simple, are needed to propel the economy to new heights. However, no mainstream economists, and even very few conservative economists, buy into the supply-side economic snake oil that drastic tax cuts alone will stimulate economic growth sufficient to generate additional tax revenues to compensate for the tax cuts.
While tax cuts alone - an expansionary fiscal policy in technical jargon - are expansionary, they will surely increase annual federal budget deficits that conservatives generally oppose, at least rhetorically. This brings us to the principle that tax reform be "revenue neutral." Tax cuts in one area must be compensated by some combination of other tax increases and spending cuts to keep the federal deficit from growing. The underlying assumption here is that the tax code can be modified to be more "pro-economic growth," while enabling the government to pay its bills.
Surely, the case can be made that if this could be done, economic growth will generate increased tax revenue that will better enable government to pay its bills and maintain popular spending programs. But this kind of tax reform, as opposed to tax cuts, is easier said than done.
This was all alleged to be made easier with spending cuts ostensibly reaped from "repeal of Obamacare." Republican failure eliminated this option.
A broad principle shared by many politicians is to broaden the base while cutting the rates of corporate and personal income taxes. This would ostensibly be accomplished by reducing or eliminating countless exemptions and "loopholes" that characterize the tax code.
While Republicans are critical of existing tax rates for both personal and corporate income taxes, the corporate income tax has been a prime target. Trump would like to reduce the current top rate of 35 percent to 15 percent. Utah's Senator Hatch observes that even getting it to 25 percent would be a challenge. The intent is to encourage corporations to repatriate profits earned abroad back to the U.S.
Experience with the tax repatriation holiday of 2004 was dismal. Only a small proportion of funds held overseas were repatriated, and these funds were disproportionately used to increase stock dividends and stock buybacks that rewarded stockholders - the vast majority of stocks are owned by the nation's wealthiest citizens. The president of the conservative-leaning Tax Foundation admits that paying for corporate tax cuts of the desired magnitude "is a tremendous challenge if you don't want to blow a hole in the deficit. ... Anyone writing tax legislation will find that the options are very limited."
How about all those "loopholes," such as exemption for health insurance? As businesses are encouraged to provide health insurance for their employees, it would be counterproductive to eliminate the deduction for this expense. And to tax employees on the value of their health insurance received would be a political non-starter.
How about the tax deduction for mortgage interest enjoyed by home owners? Elimination of this deduction would not only alienate middle class home owners but would bring the wrath of the real estate industry upon politicians.
Republicans have already shelved a "border tax," a tax on imports proposed by Speaker Ryan. Another proposal is to eliminate the deduction for state and local taxes paid. This would particularly hit taxpayers of high tax states including New York, California, and Wisconsin. Many Republicans have already objected to this proposal.
Another proposal is to raise tax rates on dividends and capital gains. Raising these rates and reducing corporate income taxes would shift the burden from corporations to shareholders, reducing the "double taxation" embedded in the current system - corporations pay taxes on profits, and shareholders pay taxes on dividends, albeit at reduced rates. It is unclear how much revenue would be raised by increased taxation of dividends and capital gains. However, this runs counter to the Republican orthodoxy that low capital gains tax rates stimulate economic growth, and is probably off the table.
There is good reason why comprehensive tax reform occurs so rarely in spite of politicians universally citing its need. It's tough, it's contentious, and there are no easy options. Democrats will, and should, continue to insist that tax reform not be a Trojan horse for reducing taxes for the nation's wealthiest.
But Republicans are in control, and must first agree among themselves.
- John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Fridays in the Monroe Times.
For seven years, with the aid of the slothful media, Republicans hammered Democrats on health care. After seven years of bombast and seven months in control, the hollowness, and heartlessness, of the Republican agenda is revealed. Feeble attempts of Republicans to blame Democrats for failure rings hollow. The supine, inarticulate Democrats had nothing to do with Republican failure. It was simply a matter of Republican incompetence and malfeasance. They never had a plan. President Trump is too obtuse to have observed that the President must lead and sell controversial legislation if he expects congress to enact it.
And whaddaya know, even the out-of-touch broadcast media, including sleep-walking NPR, finally discovered, and were willing to publicize, testimonials of people that depended on "Obamacare," owing their lives and financial solvency to legislation that Republicans hated.
With Trump acting as if he were first to discover the complexity of health care policy, and congressional Republicans revealing the hollowness of their agenda, they agree - let's move on to the "easy stuff," tax reform.
Wall Street and corporate America salivate like a bunch of Pavlov's dogs at the mere mention of tax cuts. Their sycophants in the media, and even some Democrats, agree that "tax reform" is urgently needed. But just a minute - are we talking about tax cuts, or tax reform? And just what constitutes "reform?"
The ideological right wing asserts that tax cuts, pure and simple, are needed to propel the economy to new heights. However, no mainstream economists, and even very few conservative economists, buy into the supply-side economic snake oil that drastic tax cuts alone will stimulate economic growth sufficient to generate additional tax revenues to compensate for the tax cuts.
While tax cuts alone - an expansionary fiscal policy in technical jargon - are expansionary, they will surely increase annual federal budget deficits that conservatives generally oppose, at least rhetorically. This brings us to the principle that tax reform be "revenue neutral." Tax cuts in one area must be compensated by some combination of other tax increases and spending cuts to keep the federal deficit from growing. The underlying assumption here is that the tax code can be modified to be more "pro-economic growth," while enabling the government to pay its bills.
Surely, the case can be made that if this could be done, economic growth will generate increased tax revenue that will better enable government to pay its bills and maintain popular spending programs. But this kind of tax reform, as opposed to tax cuts, is easier said than done.
This was all alleged to be made easier with spending cuts ostensibly reaped from "repeal of Obamacare." Republican failure eliminated this option.
A broad principle shared by many politicians is to broaden the base while cutting the rates of corporate and personal income taxes. This would ostensibly be accomplished by reducing or eliminating countless exemptions and "loopholes" that characterize the tax code.
While Republicans are critical of existing tax rates for both personal and corporate income taxes, the corporate income tax has been a prime target. Trump would like to reduce the current top rate of 35 percent to 15 percent. Utah's Senator Hatch observes that even getting it to 25 percent would be a challenge. The intent is to encourage corporations to repatriate profits earned abroad back to the U.S.
Experience with the tax repatriation holiday of 2004 was dismal. Only a small proportion of funds held overseas were repatriated, and these funds were disproportionately used to increase stock dividends and stock buybacks that rewarded stockholders - the vast majority of stocks are owned by the nation's wealthiest citizens. The president of the conservative-leaning Tax Foundation admits that paying for corporate tax cuts of the desired magnitude "is a tremendous challenge if you don't want to blow a hole in the deficit. ... Anyone writing tax legislation will find that the options are very limited."
How about all those "loopholes," such as exemption for health insurance? As businesses are encouraged to provide health insurance for their employees, it would be counterproductive to eliminate the deduction for this expense. And to tax employees on the value of their health insurance received would be a political non-starter.
How about the tax deduction for mortgage interest enjoyed by home owners? Elimination of this deduction would not only alienate middle class home owners but would bring the wrath of the real estate industry upon politicians.
Republicans have already shelved a "border tax," a tax on imports proposed by Speaker Ryan. Another proposal is to eliminate the deduction for state and local taxes paid. This would particularly hit taxpayers of high tax states including New York, California, and Wisconsin. Many Republicans have already objected to this proposal.
Another proposal is to raise tax rates on dividends and capital gains. Raising these rates and reducing corporate income taxes would shift the burden from corporations to shareholders, reducing the "double taxation" embedded in the current system - corporations pay taxes on profits, and shareholders pay taxes on dividends, albeit at reduced rates. It is unclear how much revenue would be raised by increased taxation of dividends and capital gains. However, this runs counter to the Republican orthodoxy that low capital gains tax rates stimulate economic growth, and is probably off the table.
There is good reason why comprehensive tax reform occurs so rarely in spite of politicians universally citing its need. It's tough, it's contentious, and there are no easy options. Democrats will, and should, continue to insist that tax reform not be a Trojan horse for reducing taxes for the nation's wealthiest.
But Republicans are in control, and must first agree among themselves.
- John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Fridays in the Monroe Times.
