ObamaCare repeal was defeated in the Senate by Arizona Sen. John McCain’s unexpected “no” vote.
So what now?
The plan was: One, repeal ObamaCare. Two, pass tax reform. Three, win in 2018.
Number one didn’t happen.
So is tax reform dead also? Maybe “skinny” tax reform?
{mosads}And why would we expect a different result on “take two”? Heck, John McCain also voted against the Bush tax cuts of 2001 and 2003.
Republicans wisely fought the harder fight – ObamaCare – first. It almost worked. The pivot to tax reduction/reform is now taking on the easier fight.
There are six reasons tax reform will pass “easily” unlike ObamaCare repeal.
First, on taxes, the GOP is united. Speaker Ryan says that “we had agreement on 80 percent of tax reform (before jettisoning border-adjustability) and we are now 97 percent in accord.” All agree that the business tax rate must come down to 15 percent or at worst 20 percent to be internationally competitive. Abolition of the death tax and alternative minimum tax have universal appeal. Full and immediate expensing has the backing of most Republicans and heavy manufacturing.
Second, while Republicans have little experience in repealing/reforming entitlements they are very good at cutting taxes. Every single House and Senate Republican (except Vermont Sen. Jim Jeffords) voted for the 1981 tax cuts. In 2001 every single Republican except McCain and Sen. Lincoln Chafee voted for Bush’s first tax cut. And in 2003 every Republican (except McCain, Chafee, and Sen. Olympia Snowe) voted for Bush’s second tax cut.
Third, the Trump/GOP tax proposal is very pro-family and helpful to middle class voters. It reduces the number of tax credits from seven to three. It doubles the standard deduction from $6,000 to $12,000 and a family of four’s standard deduction from $12,000 to $24,000. And the reform so simplifies the tax code that 95 percent of American taxpayers will not have to itemize.
Fourth, the business community is united in support of the major components of tax reform. Larger American businesses that compete internationally demand that the 35 percent rate fall to 15 or 20 percent so that when one adds the average state income tax of 5 percent we can compete with European firms facing an average of 23 percent tax rates. And equally important for Republican elected officials, smaller firms that are organized as Subchapter S corporations and pay taxes through the personal income tax demand that they see their tour ate now 40 or 44 percent fall to 15 or 20 for equity the big companies.
Two powerful lobbies, larger companies and smaller business leaders are united. For the first time in income tax history, all agree that we must bring the tax on Subchapter S corporations – so-called pass throughs where smaller businesses pay their business taxes through the personal income tax – to parity with larger businesses.
Fifth, there is an election in November 2018. Annual economic growth since the recession ended in July 2009 has been an anemic 2 percent or less. Reagan won his 49 state 1984 landslide after his tax cuts had taken effect in January 1983 and delivered 4 percent growth for almost two years. All 240 Republican congressmen are up for election, 10 senators are up. They want strong economic growth starting in the first quarter of 2018 – not the third quarter. (Bush lost in 1988 with solid growth – in the third quarter of 1988.)
The focus will be on growth because it is good for the country, but perhaps also because it is life or death for the Republican majorities. Republicans had hoped to have two bragging points in November 2018: ObamaCare repeal and pro-growth tax reduction. Now the tax victory must be “huge” and provide solid growth to carry the narrative.
Sixth, Democrat opposition will be hysterical and universal, but oddly muted. Everyone fully understands that not a single Democrat will vote for any tax cut. Period. The party has swerved hard left from the days when 37 Democrat senators voted for the tax cut of 1981 and 33 supported Reagan’s tax reform of 1986.
Still, Democrat senators have long been telling their corporate donors and small business constituents that they “feel their pain” of high business taxes. Many Democratic congressmen have friends that pay the alternative minimum tax and the death tax. Democrat opposition will in some cases be transactional. They have to sound and look “progressive,” yet signal to their voters that they understand the need for lower business taxes, all while never admitting the Republicans are doing what they could not or would not do for the past eight years.
Grover Norquist (@GroverNorquist) is president of the nonprofit Americans for Tax Reform.
The views expressed by contributors are their own and are not the views of The Hill.