House Republican leaders are scheduled to unveil specifics of their tax overhaul plan this week, a plan that Republicans hope to push through Congress in a matter of weeks. While the inefficient, overly complex tax code has long needed reform, there are several big concerns about the current effort:
1. Republicans should rethink their plans to increase the federal deficit to finance the tax cuts.
Ideally, an overhaul of the tax code should help reduce federal deficits, which are already projected to grow by over $10 trillion in the coming decade. Washington is currently on an unsustainable fiscal path, and The Concord Coalition has long argued that tax reform should be part of the solution.
As Concord pointed out last week, however, Congress is moving in the opposite direction with deficit-financed tax cuts. Such cuts are likely to act as a drag on long-term economic growth rather than boosting it.
Faced with the prospect of steep tax cuts, a number of Republicans in the House and Senate seem to have forgotten their frequently voiced concerns about deficits. It is important to remember -- as many economists across the political spectrum have noted in recent days -- that tax cuts, while they can provide some short-term boost for the economy, do not “pay for themselves.”
The tax code is currently riddled with special provisions, often called “tax expenditures,” that favor certain taxpayers, businesses, industries and activities. These are essentially spending programs but generally do not receive as much public scrutiny as direct government spending.
Reducing or eliminating many of these tax expenditures could provide the additional federal revenue to pay for a reduction in overall tax rates and some deficit reduction. Lawmakers should take this more responsible approach rather than adding $1.5 trillion in deficits over the next 10 years, as envisioned by the recently approved congressional budget resolution for Fiscal 2018.
2. Bipartisan cooperation would improve the chances of broad, effective tax reform.
Such cooperation would make it easier for lawmakers to stand up to the heavy pressure that special interests are now exerting on Capitol Hill to protect provisions in the tax code that favor them.
In addition, some Democrats -- along with some Republicans -- have raised legitimate concerns about increasing deficits. And a bipartisan effort is more likely to produce a tax overhaul that more evenly distributes the sacrifices that will be necessary to cut rates and hold down government borrowing.
The congressional budget resolution, however, was intended to enable Republicans to pass tax legislation without any Democratic votes. So there has been little serious discussion of bipartisan cooperation.
3. In hopes of avoiding many of the special-interest objections to the loss of tax expenditures, Republican leaders plan to rush their plan through Congress as quickly as possible. Speaker Paul Ryan has talked about the House passing the tax legislation by Thanksgiving.
That’s an extremely ambitious schedule, as virtually everyone on Capitol Hill knows.
Overhauling the massive federal tax code is an extremely complicated job, and the consequences of mistakes and unintended consequences could be far-reaching. Consequently, Ryan and other Republican leaders should be realistic about how much time will be needed to do the job right.
Lawmakers and their staffs should be given enough time to review the proposals that are rolled out this week -- and to consider objections to them and examine possible alternatives.
In short, lawmakers have a responsibility to know what they are voting on. That’s especially true if tax overhaul remains a one-party project. And members of Congress who really care about fiscal responsibility should demonstrate that by rejecting tax plans that would increase the deficit.