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Forget Reagan: Trump’s Tax Plan Is More Like George W. Bush

Instead of permanent tax reform we get temporary taxcut-and-spend, again.

Still at it. ||| ReasonReasonIn the run-up to today's big White House tax-reform announcement, the question among many analysts was: Would President Donald Trump's ideas look more like Ronald Reagan in 1981 (when he and a bipartisan congressional majority cut rates) or 1986, when they simplified the code? While Treasury Secretary Steven Mnuchin, flanked by National Economic Director Gary Cohn, bragged that the administration's plan was both "the biggest tax cut" and the "largest tax reform" in U.S. history—1981 and 1986 at the same time, only more!—the more apt and less comforting historical precedent might be the guy who Trump never tires of bashing: George W. Bush.

The second President Bush pushed through tax cuts in 2001 and 2003, each of which passed with fewer than the 60 Senate votes required by an amendment to the 1974 Congressional Budget Act that demanding a supermajority for any piece of legislation seen as worsening the federal deficit 10-plus years down the road. How did the Bush cuts pass with only 58 and 51 votes, respectively? By including sunset provisions right at that 10-year mark. You can't be accused of affecting the year-11 deficit if you die at age 10!

In word and deed, President Trump appears poised to follow down Bush's path of temporary tax reform through budget reconciliation; i.e., passing it on a party-line, simple-majority vote. "I hope [Democrats] don't stand in the way," Mnuchin said at the press conference. "And I hope we see many Democrats who cross the aisle and support this. Having said that, if they don't, we are prepared to look at the reconciliation process." House Speaker Paul Ryan (R-Wisc.) echoed the sentiment: "We want to look at every avenue, but we think reconciliation is the preferred process, we think that's the most logical process to bring tax reform through," Ryan told reporters Wednesday.

There are exactly two ways you can sidestep the 60-vote rule. The first is to make sure the tax changes project to being deficit-neutral a decade from now. Given that Trump's campaign tax-reform framework, upon which today's announcement was largely based, had previously produced revenue estimates from conservative outfits showing a decrease of around $3.5 trillion over 10 years, it's damn near impossible to imagine the Congressional Budget Office or the Joint Committee on Taxation (Congress' go-to economic projection shops) torturing those 13-figure numbers out of existence, no matter how "dynamic" their scoring.

Worsening those prospects—though arguably making the policy world a better place—the Mnuchin/Cohn duo swatted away one of the main proposed revenue-generators of 2017 tax reform: Paul Ryan's treasured and troublesome "border adjustment tax," a tariff by any other name that the speaker was counting on to offset the revenue hits by $1 trillion.

Americans for Tax Reform President Grover Norquist, no fan of either taxes or tariffs, told me last week that he was in favor of the Border Adjustment Tax as the price for getting a $2.5 trillion tax cut. Without it? "There are two options to that," Norquist said. "You could have a smaller tax cut, not get rid of the death tax, not take the individual rates down or the corporate rates down as much. But you have to find a trillion dollars in less tax-cutting. Or you could have a tax that replaced it, some tax somewhere else. I'm not sure there's one that's an improvement."

Well, Mnuchin and Cohn did include a big revenue generator in today's press conference, in the form of eliminating the federal tax deductions that Americans can take on their state and local taxes, a change that the Washington Post says "could save more than $1 trillion over 10 years." This idea, which makes intuitive sense, would nonetheless be heavily disruptive to those of us who live in high-tax states. And not just in those Democratic-bubble strongholds like New York, California, and Illinois—according to this WalletHub analysis, vying for worst American state/local tax burden are the deep red states of Nebraska and Iowa (ranked 50th and 43rd out of 51, respectively), plus the Trump swing states of Michigan (44th) and Ohio (45th). That's five Republican senators right there, at a time when the GOP advantage in the Senate is just 52-48. If this provision passes, I'll eat my baseball glove. (And then move to Nevada.)

Steve Mnuchin can say that the tax cut "will pay for itself," but it is extraordinarily unlikely that any reputable governmental economic-projection outfit will agree. So what was that Option #2, Mr. Norquist?

"I'd have to give up on permanence, and make it temporary," he said. The problem with that: "Going to temporary means that people can't plan. And you won't get the economic benefit of reforms if people think they disappear in a few years."

It is true that some of Bush's tax cuts were eventually made permanent, and that Trump's people are clearly hoping to press whatever advantage they have now to maybe achieve that or other tax-code goals later. But it's also true that, coupled with his other commitments, Trump is setting himself up to mimic one of the signature aspects of a presidency he disdains. Taxcut-and-spend is back, baby, and with it any last claim that the Republican Party is serious about confronting the national debt.

There is plenty to like about the tax-reform bullet points distributed by the White House. A 15 percent corporate tax rate is one helluva lot better than 35, and could conceivably spur the kind of growth America has not seen this whole grim century. The Alternative Minimum Tax, among other intended hatchet victims, does not deserve our sympathy. And though it's getting much less play, the switch to a "territorial" tax system—meaning, you pay taxes on what you earn here, not what you earn abroad—is a welcome and long-overdue change in a global outlier of a tax policy. ("We want any American company that makes money in Germany to be able to bring it back easily and not be punished for bringing it back," Norquist said. "That's the way the rest of the world operates, it's not how we operate.")

I predict...pain. ||| AEI/ReasonAEI/ReasonBut even if the economy responds to temporary tax cuts and aggressive regulatory rollbacks with a historic growth spurt (looming trade war be damned), that will not make up for the fact that President Trump has no demonstrated interest in cutting back the biggest drivers of federal spending: Social Security, Medicare, defense, and interest on the debt. His first proposed budget, a political nonstarter, only manages to keep spending flat by proposing agency cuts that Congress will never agree to. His infrastructure plan, as an opening bid, promised Democrats they could spend around $200 million of federal money (still not nearly enough for the Chuck Schumers of the world). He is so far operating a more interventionist foreign policy than he campaigned on. At a time of unprecedentedly worrisome debt overhangs and entitlement bubbles, Trump has steered an all-too-willing GOP into fiscal fantasyland.

Few politicians win elections by bumming out voters with the realities of trade-offs. As the late, great economist James Buchanan wrote midway through the Reagan presidency:

"The attractiveness of financing spending by debt issue to the elected politicians should be obvious. Borrowing allows spending to be made that will yield immediate political payoffs without the incurring of any immediate political cost."

What's more, Buchanan warned, "the replacement of current tax financing by government borrowing has the effect of reducing the 'perceived price' of government goods and services," with the result that taxpayers "increase their demands for such goods and services."

It was for this reason that Buchanan favored balanced budget amendments rather than an endless series of tax cuts. If voters knew how much their government actually cost, he reasoned, they might finally get serious about restraining it. As his former colleague Tyler Cowen put it in The New York Times in March 2011, Buchanan "argued that deficit spending would evolve into a permanent disconnect between spending and revenue, precisely because it brings short-term gains. We end up institutionalizing irresponsibility in the federal government."

There are a handful of politicians on Capitol Hill, many from the Tea Party wave beginning in 2010, who are aware of Buchanan's work, and even campaigned on openly confronting fiscal illusions and realistic tradeoffs. Some of those politicians, such as Rand Paul and Mike Lee, are among the razor-thin GOP majority in the Senate. It will be interesting to see how they react to the near-term scrums over government shutdowns, border-wall financing, emergency supplemental requests, and massive tax cuts.

As for Trump, he was already going into his presidency with a chance of topping even the flagrantly irresponsible Barack Obama in creating new debt. The economy, and American pocketbooks (outside of New York and California, anyway), might get a temporary sugar high, and here's hoping they do. But the long-term fiscal picture is arguably bleaker today than it was yesterday. Trump, whatever his many flaws, was supposed to at least provide a sharp break from politics as usual. With his Bush-style tax cuts and Obama-like spending, however, he is instead giving us more of what has made the 21st century so disappointing in the first place.

Photo Credit: Salon

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  • GILMORE™||

    I don't know what any of this means, but I'm pretty sure Hitler did something similar

  • NotAnotherSkippy||

    What would Rand Paul say?

  • Hank Phillips||

    True dat! According to today's Juneau Empire, the Federal Postal Monopoly is interfering with hemptepreneurs trying to mail tax money in to Alaska State Treasury coffers. George Holy War Bush repeatedly called for the death sentence for these kinds of kingpins and his monopoly minions are calling the revenue "drug money." Evidently, asset-forfeiture's too good fer 'em! Git a rope!

  • Hank Phillips||

    "agency cuts that Congress will never agree to. "
    As soon as third-party spoiler votes cost the looters their jobs, they'll agree to gassing their grandmothers.

  • DarrenM||

    This is very simple. If projections say some legislation will cause a one trillion dollar deficit, for example, just add in a one time tax for one trillion dollars in year 9. Someone will repeal that particular provision down the road.

  • Fk_Censorship||

    Until the income tax and tax on profit are repealed completely, there will be no tax reform. We need to stay out of people's internal business decisions and finances. And if democracy is to survive, everyone should pay the same amount, if everyone's vote has the same weight.

  • creech||

    So, never.

  • afk05||

    So what is the argument against a flat tax? 10%, no write-offs, loopholes or any exclusions? Someone making 30k a year pays 3k, someone making 3mil pays 300k. Isn't that a win for everyone in very simplistic terms?

  • Scarecrow Repair & Chippering||

    Not progressive. The left will scream and rant and throw tantrums in aisle 3, and they'll easily be able to collar a lot of red staters who know nothing else and have been brainwashed into thinking progressive tax brackets are God's Way.

  • Liberty Lover||

    Even if a 10% flat tax was instituted, how long do you think 10% would last? Next they would need 13% and then 15%, then again 20% and soon we would be paying the top tax rate now, and still have deficits. It is so easy to spend other peoples money, the temptation is to great.

  • loveconstitution1789||

    But everyone pays x%, so the increases would get everyone's attention.

    Hence the fear from politicians of the flat tax. Since the 'poor' dont pay income taxes and tax increases give more free shit to 'poor' people, the politicians only have to sell tax increases to some Americans rather than all Americans.

  • Coach Mickey||

    Liberty Lover is spot on.
    Reagan led tax reform eliminated lots of deductions, such as passive activity losses, in exchange for reductions and simplification of rates, down to two: 15 and 28%. That is why is was called tax reform not tax reduction. It was revenue neutral.
    Then Bush one had a lip transplant and raised the top rate, which opened the door for Slick Willie to raise them again...and so on.
    And, who's to say, LOVECON, that future congresses won't move from one rate flat tax to more than one.
    The only thing that MIGHT keep future congresses in check is to require a super majority to raise rates. Without that, flat tax is a dangerous and slippery slope.

  • Redcard||

    That would work perfectly.

    10% would be too little at our current rate of spending, so if we cut the defense spending as well to make do, cool.

  • Scarecrow Repair & Chippering||

    I once ruminated on various taxes. Decided that the only fair tax is a land tax, because it's the only one that can be paid anonymously. Sales tax and income tax require keeping books that governments must audit. But government doesn't have to know who owns a parcel, just that the tax was paid.

    As to how much, I came up with a slick solution. People self-declare their property value, which also limits how much they can collect in court restitution. The government comes up with a tax rate from their income requirement and the total valuation. Sure, some people will low ball the valuation and hope they never need to recover damages, and others will post high valuations so they can torch the place and collect insurance. But it would even out and settle down.

    You can figure per-family averages. Local, state, and federal governments spend $8T a year, and there are anywhere from 100M to 150M families, depending on definition, or $50K to $80K, which sounds high, but it's the same as now but mostly hidden (business tax, employer SS tax, FICA, etc), sales tax (10%), income tax, property tax. The main difference would be not spending as much (no sales tax etc) and getting paid more (no SS tax) and paying the tax directly and obviously.

  • Coach Mickey||

    So, cut the one area that is a constitutionally backed responsibility of our Fed Govt?
    Why not cut everything else.
    We have cities, counties and states that provide services to its people. Fed Govt needs to get out of the services business.
    Without medicare, medicaid and sos sec reform it is only a matter of when, not if the storm hits.

  • BYODB||

    The arguments against a flat tax are the same as they've ever been? Or have you never read an economics textbook? 10% of someone's income if they're making 25k is a larger burden than 10% of someone's income when they're making 100k a year. In other words, it would be a massive tax hike for the majority of American's and would put the largest burden on those making the least.

    While that might be 'fair' it would also involve a lot of hard political decisions that will never be made. Go ahead and sell tax hikes to the poor and tax cuts for the rich and see how that works out for the party that tries it. It sounds great in theory, but in practice it's a nonstarter.

  • marshaul||

    A flat tax would be fair if it was marginal - 1 or 2 percent, thereabouts (small enough that it's lost in the "noise" even for the poor). But that's a government which survives on spare change, not a government which depends on active parasitism.

    The harsh reality is that it's logically impossible to have a non-voluntary government which is "fair". Either the poor suffer a disproportionate burden because FTTW, or the rich pay more than their fair share because fuck them too.

    Although I did find the idea, mentioned above, of a self-declared-value land tax to be intriguing. This, in effect, allows each land owner to decide on the amount of protection he desires from government. If he wants none, he can pay no tax and receive none. If he wants more than his property is valued by others, he can "buy" that, too. Of course this system has the inherent problem that better land can produce more wealth and thus justify a higher investment in its protection, which in this context implies a civil justice system which intrinsically favors the wealthy ipso facto.

    I'm not sure there's a solution within the current paradigm of rule.

  • marshaul||

    Hmm, "parasitism" was a poor word choice, here. "Support" might have sufficed; I merely wished to convey the difference between something which survives on chaff vs. something which depends on, and expends, the lifeblood of human beings.

  • Agile Cyborg||

    I am mortified at this place I once enjoyed as home over its ignorant obsession with illegal immigration and a butt-tonguing love with Islamic world-spreading but the sole benefice of this orange comet's edge is the blatant reality that this Orangutan 'R' is NOT a goddamn earthly college spun across countries including Meureka where admins and editors bleed bullets over 'fucks' and get constipated over goddamn actual free speech...

    This is a common square, bro, where you can and FUCKING SHOULD post your avatar as 'Fuck_Censorship'.

    Just be, Fuck_Censorship... I mean how FUCKING hard it is, bro. Jesus FUCKING all of Muhammad's tall stringy Turkish perfect hair-line (hard to find fucking Islamic brutalists without fucking fantastic hair) Islam-vaunting atheist-killers in the ass with a gigantic St. Paul penis....

    Just be, FUCK_CENSORSHIP

    you can do that here, kitten

  • Hank Phillips||

    The current GO-Pee Drug Czar is also a lot like the George Bush drug Czar. Remember Walters? That was the guy whose appointment was supposed to be rubber-stamped on September 11, 2001. The new Republican is from the state with all the Merck pharmaceutical plants--the same ones that were operating before Herbert Hoover was defeated.

  • Sevo||

    Hank, I see you're not pleased with the GOP. That's understandable; they're not known as the stupid party for nothing.
    The D's, however, never seem to get a knock from you. Can we draw conclusions here?

  • Agile Cyborg||

    Socialist rags cannot be trusted with the truth which fucking equates to a daily volcanic stew spew from the millennialized rag asses about all sorts of Trump shit so sticky and smelly one frankly disgustingly wanders off and thinks about novels, gardens, dogs, purple lightning, odd shrooms, and oceanic adventures to avoid the head winds of goddamn manipulative maelstroms pinching their noggins from the reality inventors dancing fingertips on the mass digital slates.

    Reason. I'd throw Reason right into the muck of dry leaves and dying feline friends where the air is stale, unfortunate, and where stomping bar 'pals' don't get the key to the fucking cloud cabin.

    Fucking right-wingers are like old stringy pork hung on a long-lost ledge where the sun hits long. You can still eat it but it ain't like pussy- sweet, svelte, and fucking toe-wriggling tasty. Right-wingers are where cops and gods go to nap with puppies and cotton daydreams spun from suburban mothers smashing her night-time wine clit so hard it squirts normality and goddamn little plants erect in the sunbeams of perfect Saturday mornings.

  • Agile Cyborg||

    My favorite poet Jim harrison wrote 'death makes you notice'...
    He passed last year and Garrison Keillor shat in his mouth like the misaligned stage Cretan he has always been but all the bright undertow understand that GK is a fucking long-term old wood tap-dance with shit designed for strip mall bookstores where bored dad's shop out of desperation and lonely mums buy coffee jittering her knees with serial killing madness alongside kids warbling about youtube suggestions.
    Fuck Garrison Keillor
    Jim Harrison is the goddamn GOD of that lusty tank of writers billowing through the seated spectacle of a whistling knower of deeds warbling his godawful shit never written by him.

  • Agile Cyborg||

    Fucking Garrison Keillor is over-rated prog cum cast from a litany of dervish wimpish Minnesota slash wanna-be Wisconsin field weeds. Betcha all didn't know fucking Minnesota is a goddamn whirlpool of golden poets... yeah... Tom Hennen, I own everything he wrote. But, he was loved by Jim Harrison and shit so fuck Garrison Keillor.

  • Agile Cyborg||

    if your eyes light on this flashing fishing
    confused bullshit
    stop
    STOP
    kiss your living things in
    your hovel on the heads and cheeks
    and hold them so fucking tightly
    STOP
    look into their eyes and feel how much
    they mean to you
    every FUCKING day... it all goes so goddamn
    fast
    like time on speed
    it goes cassette tape fast
    wait, you ask, how fast does a cassette tape go?
    Well, I retort... way fucking fast like 80's fast before
    all the shit fucked time up
    Enjoy your cassette tape pets, sisters
    before you know their fucking tapes get a janky
    my tears oil my keyboard over my lovely Bright Eyes
    dying tonight... 20 years with her I and I have to take
    her in first thing in the morning to stop the suffering...
    FUCKING give your pets respect and love... every
    goddamn day for decades

  • notJoe||

    Fucking hell Agile, that sucks. I know.

    Sending long-distance warmth your way.

  • Redcard||

    reason.com Republicans who pretend to be libertarians should note:
    TAX CUT (i.e. BORROW) and SPEND is usually the Republican way, always has been
    TAX and SPEND is usually the Democratic way, always has been

    Guess which one is more responsible.

    Trick question. Obviously the first, since Republicans are in charge, and deficits do not matter now

  • Azathoth!!||

    TAX CUT is usually the Republican way, always has been
    SPEND(even if you have to borrow , steal, or lie) is usually the Democratic way, always has been

    FTFY

    See, here's the thing, people who actually believe your moronic statement always seem to forget that there are always at least two parties involved.

    And the way it's always worked is that Republicans want people to keep their own money so that they'll vote for Republicans, while Democrats always want to spend other peoples money to pay people to vote for Democrats.

    Deficits only come from one of those.

    We get deficits because Democrats refuse to stop redistribution spending no matter what's going on. Even when they promise to stop spending.

  • Calidissident||

    Your analysis is too kind to the Republicans. I agree with what you say about the Democrats, but the Republicans have shown over the years that they have no problems spending other people's money. And if your plan is tax cuts, but spending increases thus massive deficits forever, you're not actually being responsible or pro-freedom, you're just kicking the can down the road so you can promise goodies without actually making people pay for them, thus maximizing your election chances.

  • Robert||

    Actually the pattern from ~1950-85 was that the Democrats borrowed, then the Republicans raised taxes to be "responsible".

  • Board Results 2017||

    The second President Bush pushed through tax breaks in 2001 and 2003, each of which gone with less than the 60 Senate votes required by a correction to the 1974 Congressional Budget Act that requesting a supermajority for any bit of enactment seen as intensifying the government shortfall 10 or more years not far off. How did the Bush cuts go with just 58 and 51 votes, individually? By including dusk arrangements comfortable 10-year point. You can't be blamed for influencing the year-11 shortage on the off chance that you pass on at age 10!

    Check UP 10th Result 2017 online on official website of the Uttar Pradesh Board of Secondary Education.

  • Don't look at me.||

    Fuck it. Just cut taxes. If you are so worried about the deficit, you are welcome to send Uncle Sam a check.

  • BYODB||

    Note that the Bush tax cuts did actually result in growth, as most people would expect. I'm not really sure what the overall point of this article is, but I'm all for the simplification of the tax code. We'll see what actually materializes though. It's Trump and Paul Ryan so I'm not holding my breath that it will be anything like the Bush tax cuts, let alone Reagan, or that it has a reasonable chance at passing. Trump seems to be a huge fan of tariffs, which is pretty stupid overall.

  • marshaul||

    "This idea, which makes intuitive sense, would nonetheless be heavily disruptive to those of us who live in high-tax states."

    Good. The federal government should stop subsidizing your state's excesses. I left California precisely because of its governmental excesses, and all decent people should find a way to do the same if they live in similar state.

  • Curmudgeon44||

    If the tax software companies don't scream bloody murder, the reform doesn't go far enough. There is so much crap complication in the code, it feeds Intuit (Turbo Tax), H&R Block and a whole market sector. Their software unit sales should drop by 50% with some common sense reforms.

    Intuit is the swamp!

  • bmmt||

    Good. The federal government should stop subsidizing your state's excesses. I left California precisely because of its governmental excesses, and all decent people should find a way to do the same if they live in similar stat

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