On the campaign trail, President Trump promised to slash corporate taxes from 35 percent to 15 percent. The president has reportedly ordered his economic team to make his promise a reality.
During a meeting inside the Oval Office last week, Mr. Trump told staff he wants a massive tax cut to sell to the American people, the person said. It was less important to him if the plan loses revenue. Mr. Trump told his team to “get it done,” in time to release a plan by Wednesday.
The congressional Joint Committee on Taxation estimates that the president’s proposal could result in a loss of $2 trillion in tax revenue over the next ten years. The fulfillment of this campaign promise to cut taxes could potentially run afoul of another promise the president made.
During the campaign, Mr. Trump boldly proclaimed he would eliminate the then-$19 trillion national debt “over a period of eight years.” This was almost certainly an exaggeration, but the principle of the president’s campaign promise is that his administration would not permit runaway deficits and debt as his predecessor did.
The impending announcement of tax cuts without plans for reducing government spending to cushion the loss of revenue will lead to large deficits in the short-term, violating the principle of debt reduction the president campaigned on. While the administration will argue — with merit — that the economic growth resulting from lower taxes will compensate for the loss of revenue, those are long-term results.
In the near-political future, President Trump will appear to run up the deficit and in doing so will cast the Republican Party as the party of fiscal hypocrisy. And there will be political consequences.
A massive cut to corporate tax rates is simply not going to sit well with the American people without complementary cuts to government spending. The Democrats will seize on the GOP’s apparent hypocrisy, and in addition to the Republican Party’s failure to keep other key campaign promises (where is the full repeal of Obamacare?), the picture painted in midterm elections will be decidedly anti-GOP.
If Republicans cannot keep basic campaign promises on Obamacare and on deficits, what justification will there be to keep them in office?
Further, as CR’s Daniel Horowitz has written previously, Republican plans for “tax reform” that do not tackle the problem of the debt fail to address the “challenge of our time.”
Debt is the challenge of our time, not taxes: Taxes used to be the most important domestic policy issue, not only because the tax structure determined how much money stayed in the private sector, but because it was the source of nourishment for the federal leviathan. As such, by cutting taxes, we’d accomplish both the goals of economic growth and limiting the size of government. That era is over. Debt, serviced by monetary manipulation, is the new nourishment of a much greater entitlement state than Reagan ever feared. That is the challenge of our time, much like taxes were the challenge of Reagan’s time. The lesson of the Bush years was that we succeeded on the tax issue but needed to begin work on spending, entitlements, and dependency. Instead, we have gone backwards.
President Trump has adamantly refused to contemplate entitlement reform. His administration is still advocating for a $1 trillion infrastructure plan. His recent proposed skinny budget still contains a $488 billion deficit.
The administration is not rising to the challenge of addressing America’s debt. While tax reform is necessary for economic growth, it is disappointing to see consideration of the deficit so callously tossed to the wayside.