Tax cuts are the defining economic policy issue of the modern GOP. As the late columnist Robert Novak once said, “God put the Republican Party on earth to cut taxes.”
But personal income tax rates today are way lower than they were before Reaganomics. And the national debt has soared in the 2000s and is headed toward crippling levels. These realities, along with current economic challenges such as middle-class wage stagnation and job polarization, are causing a rethink on the right concerning what tax reform should look like in the 2010s and beyond. Mike Lee, for one, would like a much bigger child tax credit to boost take-home pay for families. Paul Ryan would prioritize cutting the top personal tax rate to 25% from 40% to boost economic growth. (Ignore, for a moment, that the Lee plan would lower the top rate, too, just not as far as Ryan would prefer.)
The media, of course, would like to frame this policy disagreement as an emerging ideological and spiritual death match among conservatives and Republicans. The reformocons/reformicons vs the supply siders. Begun, the Tax War has.
But war, either civil or uncivil, is unnecessary. For starters, and the media usually misses this, both sides understand that the business tax code is terribly anti-growth and uncompetitive. Deeply cutting the corporate tax rate, ending business tax breaks, and allowing businesses to write off the full cost of their investments immediately are among the ideas with wide support. And here is Ramesh Ponnuru on how to best blend these competing though complementary approaches to individual tax reform:
You can’t draw up a realistic budget with a top tax rate of 25 percent and a large child credit. (You might not be able to draw up a realistic budget with a top rate of 25 percent even without the credit.) You probably can, however, draw up one with a lower top rate than we have today and better treatment for investment — including parents’ investment in the next generation. Because that mix of policies would leave many millions of middle-class families ahead, it may well be easier to enact than a plan that concentrates solely on reducing the top rate. Supply-siders, that is, might achieve more of the rate reduction they seek if they embrace the credit.
Combining these ideas, as Senators Lee and Marco Rubio of Florida are now trying to do, seems like the obvious sweet spot for Republicans. It would allow them to be both pro-business and pro-middle class, pro-growth and pro-family. And if Chairman Ryan came on board, the party would find itself in a new friendly agreement.
Yes, the healing power of “and” in action. I wrote pretty much the same thing the other day. It’s an approach the average person might say makes so much sense, the politicians would never go for it. But a tax plan to shore up two key American institutions, the family and the private sector, really makes too much sense to ignore. And then we can move on to ideas for reforming and repairing healthcare, education, entitlements, the safety net infrastructure, financial regulation, internet regulation, energy regulation, patent and copyright law, the Federal Reserve …