Tax Reform: Serious And Not

The editors at the WSJ and Kevin Williamson at NRO show the two sides of conservative discussion of tax reform.  The latter is serious while the former is not.

The editors are all about rates.  It seems, but is not clear, that they are talking about personal rates and they certainly don’t care much about the deficit:

In an ideal world, the Senate deal would create room for tax cuts of $2.5 trillion or more. That’s at least how much more revenue the government would get if the economy returned to its historic growth rate of 3% a year from the Obama era’s 2%.

Kevin, on the other hand, recognizes the challenges that the Congress faces.  We have a significant deficit.  We have escalating entitlement costs.  We need to have dynamic scoring but tax cuts are not self-financing.  He reports (with comments) that:

President Trump’s preferred policy would reduce the top rate to 35 percent, while congressional Republicans have aimed at 33 percent, along with modest reductions in other brackets and, possibly, a large reduction in the corporate tax rate. Our corporate tax rate is one of the world’s highest on paper, but the effective rate — what corporations actually pay — is on average unexceptional, though it varies significantly from industry to industry and firm to firm.

We favor reductions in the corporate tax rate because of the variation that Kevin notes.  Corporations do things because of tax rates.  Those industries that face higher rates take actions like tax inversions to avoid them.  Rather than try to outlaw such inversions we should make the USA a tax haven so corporations and their profits come here.  It is also a reason why we favor lower corporate rates rather than immediate expensing.  We hope that the Congress takes a serious look at tax reform and make it into law.

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