Four of the most famous names in Reaganomics have penned an op-ed in the New York Times, urging President Trump and Congressional Republicans not to botch tax reform the way they did their failed Obamacare repeal.
Their message? The old admonition: “Keep it simple, stupid” and give a break to corporations first.
“We advised President Trump during his election campaign and we believe the Republican Party’s lesson for tax reform is this: Don’t try to rewrite the entire tax code in one bill,” they write.
You’ve heard all their names before, especially if you listen to conservative talk radio: publishing executive Steve Forbes, nationally syndicated radio show host Larry Kudlow, former Reagan economic advisor Arthur Laffer, and Stephen Moore, an economist and a frequent conservative pundit on cable news shows. Together the four men co-founded the Committee to Unleash Prosperity in 2015.
The team advocates for a tax bill with the following four components:
1) A cut in the corporate tax rate to 15% from 35%.
2) An immediate tax deduction on the full cost of capital spending by businesses. Under current law, businesses can take a deduction on their taxes when they spend money on new factories, equipment and machinery, but they’re required to break up that deduction over several years to account for the depreciation of those assets.
3) A lower tax on the repatriation of foreign profits brought back to the United States. Currently, profits repatriated from overseas subsidiaries are subject to the U.S. corporate tax rate of 35%.
4) Use the money raised from taxes on repatriation of foreign profits to build a fund for infrastructure spending. This last component, the authors argue, could help Republicans win more support for the tax bill from their Democratic colleagues.
In line with traditional Reaganomics, their proposals focus on lowering the tax burden for corporations. As for the "maddeningly complex individual income tax system" that affects ordinary Americans, the authors argue Trump should leave that untouched until next year.
"We should emphasize that business tax relief is not a sellout to corporations but a boon for middle-class workers," they say, noting a study that claims middle-class wages rise when business taxes fall. The source of that research is hardly impartial: It was conducted by the conservative Tax Foundation and Kevin Hassett, now the chairman of President Trump’s Council of Economic Advisers.
The opinion piece has already sparked blowback from liberal economists. Jared Bernstein, who worked for the Obama administration as former Vice President Joe Biden's chief economist, has called it "trickle-down nonsense," noting that corporations already pay far below the 35% tax rate due to loopholes. Tax cuts do increase corporate profits, but "those profits stay in the pockets of those at the top of the income scale," he writes.
As for other issues related to tax reform, Forbes, Kudlow, Laffer, and Moore argue Trump should drop the controversial border-adjustable tax, which they call a “poison pill for the tax plan.” Meanwhile, Trump should also stop promising that tax reform will be revenue neutral, they say.
“In the short term, the bill will add to the deficit,” they write. “But President Trump’s tax bill, like those of Presidents Ronald Reagan and John Kennedy, should be a tax cut, and it should be sold to the American people as such.”