Trump Throws Himself into Tax Reform; What Could go Wrong?
He seems to have the idea that tax reform is easy. Sure, it was done just 31 years ago.
“The Trump White House is already mapping out a major, historic overhaul of the tax code, just one week after the stunning collapse of its Obamacare repeal bill.”
“It’s a move that carries enormous political risks given the complexity of the code, the size of the package they’re eyeing and the administration’s already frayed ties to Capitol Hill. But the White House is eager to move on and hopes a more hands-on approach will avert another legislative failure — even if the details of the tax plan are far from figured out.”
Tax reform is one of those things that sounds great in theory until you look at that pesky thing called details. For tax reform to be tax reform it has to be revenue neutral. But that means there will be roughly as many losers as winners-ie, it’s a wash.
In theory, by ‘simplifying the tax code’ etc, this will lead to fewer distortions by the tax code that will lead to higher growth. That’s the theory anyway, The reality is it tends to be a wash politically.
There is a lot of talk about ‘closing loopholes’ as if this is some magic piggy bank. Until we get the details which means ending the mortgage interest deduction. Then middle class people see the bargain as they lose their mortgage deduction so the rich can see their taxes cut.
‘Sure but we’ll have higher growth.’
Indeed, the 1986 version of tax reform was hardly a bargain. It phased out the credit card interest deduction. So the little guy paid for those 28% top tax rates in that case as well. Allegedly the credit interest deduction was distortionary-but it was a real boon to many average Americans.
Anyway, if anyone could pull off tax reform, Trump and friends are the last ones to do it:
Just on Thursday, President Donald Trump huddled with Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, senior strategist Steve Bannon, son-in-law and consigliere Jared Kushner and staffers from the National Economic Council and Treasury to delve into the various policy trade-offs and ways to structure a plan.
The key takeaway: The White House is not outsourcing these details to anyone, including the speaker of the House.
“The president will put out principles, I’m sure, in terms of what his goals are and drive this as the process moves forward,” White House press secretary Sean Spicer said during Friday’s briefing.
Right: Will pull out principles. In other words-no details. Once you get to the details, it falls apart.
P.S. As we saw in my poll out last week, the long awaited poll results are in, and right now I’m just 11 points down vs. Peter King (GOP-NY-District 2). And the voters don’t even know who I am yet.
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