Tax Fight on Right Turns Nasty

What direction should the GOP take on tax reform?

The hottest fight on the center-right idea scene at the moment is over tax policy for Republicans in the years ahead.

I touched on the topic in last week's column about a new report, Room to Grow. Two paragraphs of my column criticized the tax chapter of the report, which advocates a larger child tax credit.

Since then, the controversy has blown up in a way that makes it worth a return visit.

The Wall Street Journal's Potomac Watch columnist, Kim Strassel, blasted the report in her Friday column. She called it "a capitulation to the left's inequality and middle-class talking points" and wrote, "The authors are clear that politics, not principle, needs to drive conservative policy. Nowhere is that clearer than in the chapter by former Bush Treasury official Robert Stein on tax policy. A summary: Marginal tax rate [cuts] are no longer popular because they don't give much to the middle class. Republicans instead need to embrace redistribution and lard the tax code with special, conservative-approved handouts for said middle class."

A co-editor of the Room to Grow report, Ramesh Ponnuru, who is a senior editor of National Review and a fellow at the American Enterprise Institute, lashed back at Strassel in a Bloomberg View column. "It's not a flat tax, so she's done thinking," Ponnuru wrote, advising Republicans that they should avoid "taking direction from Wall Street—or, in this case, the Wall Street Journal."

On Twitter, Ponnuru was even huffier, "Speaking of things people didn't say, nice words you put in my mouth in that column," he tweeted at Strassel, accusing her of "distortion" and of failing in the "basic concept of accurately describing people's views."

Ponnuru piled on in a National Review post headlined "Reform Conservativism versus Wall Street Journal-ism," again accusing Strassel of "distortion" and asserting, "I don't think that the approach Strassel takes—let's keep talking about cutting the corporate tax rate, but louder!—is one that holds great promise for bringing about the kind of conservative renewal the country needs."

Ponnuru's allies joined in the response to Strassel's column. At the blog of the American Enterprise Institute, James Pethokoukis wrote, "If the 2016 Republican nominee wants to make his big economic idea cutting corporate taxes at a time when corporate profits are at their highest level in 85 years and worker compensation is at its lowest level in 65 years as a share of national income … well, good luck with that." He called it "a losing message."

And at Commentary, Peter Wehner, who, like Pethokoukis, was a contributor to Room to Grow, asserted, "her column so clearly misrepresents the book and the views of the various authors, to ascribe to them views and motivations that are quite obviously false."

If you are watching from the sidelines, the heated nature of the fight may be somewhat mystifying. After all, it's not exactly as if the nation has been paralyzed by debate over the past six years over whether to expand the child tax credit or cut corporate tax rates. Instead, Republicans have been fighting a losing battle to restrain the tax increases sought by President Obama and congressional Democrats.

But what both Strassel and Ponnuru and his pals realize is that if the Republicans do want to be in a position to set tax policy from the White House or a Congressional majority, they do need to go on offense, and that does mean setting some tax cutting priorities.

On the substance, Strassel has the better of this debate. As someone with three young children, believe me, nothing would make me happier than the increased child tax credit that is advocated in the Room to Grow report. But as a supply-sider who believes in a broadly neutral and simple tax policy designed to maximize incentives to work, save, and invest, the policy logic of it is hard to see.

Ponnuru and his Room To Grow co-editor Yuval Levin responded to my earlier criticism of the proposed tax credit by arguing that "it reduces redistribution by countering the tendency of entitlement programs to redistribute money from large families to small ones." Strassel encapsulated this argument by writing, "Mr. Levin and National Review's Ramesh Ponnuru this week explained that conservative redistribution is now acceptable, since it counters liberal redistribution."

The specifics of the redistribution in entitlement programs that the Room To Grow tax approach hopes to counter are sufficiently complex that they a topic for another day.

But having taken criticism on the point from myself, from Strassel, and from Larry Kudlow, the Room to Grow crowd, rather than reassessing or adjusting their position, seem to have decided in the case of Strassel to react defensively, by accusing her of distorting their position and acting as a mouthpiece for Wall Street (which, all of a sudden, is a big sin on the right or in the eyes of columnists for, of all places, Bloomberg View.)

One might aspire for the debate to be conducted with more civility. If there is a bright side here, though, it is that Republicans are arguing over how to cut taxes rather than how to raise them. Already heated, this fight is going to get even livelier in the next two years.