Bloomberg laments (or ponders) that it has been 31 years since the U.S. saw meaningful tax reform. They looked at what happened in 1986:
The result was a comprehensive bill that slashed individual and corporate rates while compensating for the lost revenue by closing loopholes. That meant eliminating tax advantages enjoyed by powerful interest groups like the oil and real-estate industries and overcoming their formidable allies in Congress.
On the way, the 1986 tax bill nearly died on multiple occasions as lobbyists pressed their cases. Throughout almost two years of debate and negotiation, the conventional wisdom was that the proposal would not survive. It was defeated once in the House. The Senate, with Democrats and Republicans equally beholden to special interests, appeared to be a certain graveyard.
Then, as the bill reached final passage, Senate Republican Leader Bob Dole marveled that in a matter of days, it went from “immovable to unstoppable.” It cleared the Senate by 97 votes to three. A combination of will, skill and ideological flexibility made it possible.
While pining for has-beens who occupied Congress for far too long, they also looked, tentatively, towards the rest of 2017.
Republicans envision a new sales tax on domestic and imported goods and services dubbed a “border adjustment tax,” a variation of a European-style value-added levy that would favor exporters like Boeing and Caterpillar over equally powerful consumer-product companies like Wal-Mart and Target, not to mention consumers themselves. There’s economic merit to the idea since it would raise money to enable rate cuts and avoids the crude protectionism that Trump has championed.
But it would create a big new tax, and already some House conservatives are objecting. So has the right-wing advocacy group Americans for Prosperity, which was founded by the Republican mega-donors Charles and David Koch.
Yes, the border tax. Therein could lurk the double-edge. The playing field needs leveling. The taxes might, or might not, do it. Cutting regulations and taxes, and reigning in the Fed certainly would. Who knows at this point? But, there is always some cause for concern.
In 1986, the tax cuts in some areas were accompanied by increases in others. Federal spending and debt continued to grow, unabated. Then there was the quiet inclusion in the deal of the Firearms Owners Protection Act (FOPA). FOPA did nothing to protect anyone other than federal bureaucrats. It drastically limited the number of available automatic weapons – driving costs through the roof and into the stratosphere. Gun grabbers were pleased. Most of the public didn’t notice.
The grabbers are still at work, recent defeats aside. I suspect they will at least attempt to introduce some type of gun control into whatever tax reforms Trump proposes this year. They must be defeated.
Then again, we now know very little about what is planned for the rest of this year. Treasury Secretary
Goldman Sachs Steven Mnuchin says a major overhaul is coming by August. We will see.
President Trump will address Congress next Tuesday, his first State of the Union remarks. It is a given he will discuss, in some fashion, the need for tax reform, among other measures. Details have been short. He’s also due to present a budget to Congress in the very near future. Tax details may be in there as well – again, details are in short supply.
So we’re going to continue on, and we’re going to take this budget, which is — in all fairness, I’ve only been here for four weeks, so I can’t take too much of the blame for what’s happened. But it is absolutely out of control, and we’re going to do things that are going to be tremendous over the years. We have to take care of our military. We have no choice, we have to take care of our military. It needs work; it’s very depleted. And we have to take care of a lot of other things.
Healthcare is moving along nicely. It’s being put into final forms. As you know, before we do the tax — which is actually very well finalized — but we can’t submit it until the healthcare, statutorily or otherwise. So we’re doing the healthcare. Again, moving along very well. Sometime during the month of March, maybe mid- to early March we will be submitting something that I think people will be very impressed by.
-Trump, Budget Meeting, Feb. 22, 2017.
I hope there’s something in it to be impressed with. The healthcare (or lack) is a tax itself. And I’m not sure why they can’t be reconciled together. At any rate, this is wait and see at this point.
While we wait we can look back at the history of taxation in America, the last 104 years. Bloomberg provided this graph:
So much can be learned by simply tracking those little lines. Before 1913, the tax rates were ZERO – no taxes. Then, just as soon as they were in place, they skyrocketed. Their trajectory closely follows wars, economic turmoil, and social spending boondoggles. Their decline since the 70s paces the insane growth of debt spending – again, the spending is not dependent of the taxes and it does not stop.
It’s too much to hope that Trump wants to return to a 1912ish sound government. Still, there’s a modicum of hope. Hope tinged with caution. Keep the guns, kill the taxes.