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“At The Top Of The To-Do List For 2017”: Here’s What Will Happen On Taxes If A Republican Is Elected President

The Tax Policy Center has released an analysis of Marco Rubio’s tax plan, which, like their analyses of Jeb Bush’s plan and Donald Trump’s plan, shows that it would result in a staggering increase in the deficit if it were implemented — $6.8 trillion in Rubio’s case, compared to an identical $6.8 trillion for Bush and $9.5 trillion for Trump.

The problem is that it’s awfully hard to wade through all these details and numbers, grasp the distinctions between them, and determine which one you find preferable.

The good news is, you don’t have to.

That’s in part because the differences between the various Republican candidates’ plans are overwhelmed by what they have in common. But more importantly, it’s because if one of them becomes president, the tax reform that results will reflect not so much his specific ideas as the party’s consensus on what should be done about taxes.

So to simplify things, here’s what you can expect if a Republican is elected president in November:

  1. Income tax rates will be cut
  2. Investment tax rates will be cut
  3. The inheritance tax will be eliminated
  4. Corporate income tax rates will be cut
  5. Corporations will be given some kind of tax holiday to “repatriate” money they’re holding overseas

And that’s basically it. Yes, there will be hundreds of provisions, many of which could be consequential, but those are the important things, and the things almost all Republicans agree on.

Let’s keep in mind that this is the policy area Republicans care more about than any other. There are pockets of conservatives for whom the details of defense policy are important, and others who care a lot about education, and even a few who care a lot about health care. But all of them want to cut taxes. They may get passionate talking about how much they want to repeal the Affordable Care Act, or how tough they’ll be on border security, or how they’ll totally destroy the Islamic State. But if a Republican is elected in 2016, it is a stone-cold guarantee that changes to the tax code will be at the top of the to-do list for 2017.

That doesn’t mean, however, that the tax reform we get will be exactly what that president promised during the campaign. For instance, Ted Cruz is proposing what’s essentially a Value Added Tax (VAT). But he won’t get that passed even with a Republican Congress, because it’s controversial within the party.

That’s critical to understand. It isn’t as though congressional Republicans, who have been waiting to do this for years, will just take the new president’s plan and hold a vote on it. Instead, they’re going to hammer out a complex bill that reflects their common priorities. It will be a product of the party’s consensus on what should be done about taxes, a consensus that has been forming since the last time they cut taxes, during the George W. Bush administration.

You can make an analogy with the ACA. By the time 2008 came around, Democrats had arrived on a basic agreement on what health care reform would look like. That isn’t to say there was no disagreement within the party. But the outlines had been agreed to by the most powerful people and the wonks within the party: expand Medicaid for those at the bottom, create exchanges for people to buy private insurance, offer subsidies to those in the middle. That’s why the plans offered by Barack Obama, Hillary Clinton, and John Edwards in that election all followed that outline, and that’s what the Democratic Congress eventually produced.

The things that I listed above are the essential tax consensus of the GOP at the moment. Some people would add or modify some elements — Rubio, for instance, would completely eliminate investment taxes while others would merely reduce them, but he would also expand the child tax credit. But the outline is the same, particularly in its effects. Here’s how we can summarize those:

  1. Poor and middle-class people will pay a little less in taxes
  2. Wealthy people will pay a lot less in taxes
  3. Corporations will pay a lot less in taxes
  4. The deficit will explode

Republicans, who profess to care deeply about deficits, will claim that their tax plan won’t actually cost anything (or will cost very little), because when you cut taxes, you create such a supernova of economic growth that the cost of the cuts is offset by all the new revenue coming in. This is sometimes referred to as a belief in the “Tax Fairy” because it has as much evidence to support it as a belief in the Tooth Fairy. It is a fantasy, but their continued insistence that it’s true requires us to address it.

You don’t need a Ph.D. in economics to remember the history of the last quarter-century. Bill Clinton raised taxes, and Republicans said the country would plunge into recession and the deficit would balloon; instead we had one of the best periods of growth in American history and we actually got to federal budget surplus. Then George W. Bush cut taxes, and Republicans said we’d enter economic nirvana; instead there was incredibly weak job growth culminating in the Great Recession. Barack Obama raised taxes, and Republicans said it would produce economic disaster; instead the deficit was slashed and millions of jobs were created.

So we don’t actually have to argue about whether the Republican tax plan will increase the deficit, because the theory behind it has been tested again and again, and the results are obvious. If they cut taxes as they’d like, maybe the deficit will go up by a trillion dollars, or five trillion, or eight trillion. We don’t know exactly how much it will go up, but we know it will go up.

As far as Republicans are concerned, dramatic increases in the deficit are a reasonable price to pay to obtain the moral good of tax cuts. If you think I’m being unfair, ask them whether they believe Bush’s tax cuts were a mistake. They don’t.

You can agree or disagree. But you don’t have to wonder what will happen if a Republican is elected. There may be other plans that president will be unable or unwilling to follow through on, but I promise you, cutting taxes is one thing he absolutely, positively will do. And we don’t have to wonder what it will look like. We already know.

 

By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, February 12, 2016

February 13, 2016 - Posted by | GOP Presidential Candidates, Tax Cuts, Tax Reform | , , , , , , , ,

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