GOP tax proposal can raise the economic tide

THE long-awaited Republican tax reform framework was released Wednesday, endorsed by President Trump and congressional GOP leaders. Much commentary focused on “winners and losers,” but the truth is that effective tax reform creates economic growth that benefits everyone.

The biggest driver of new economic growth will, if passed, be a dramatic reduction in the corporate tax rate. The current rate of 35 percent (39 percent when you add average state tax rates) is egregiously and damningly high. The average rate in other developed nations is 22.5 percent. The GOP framework proposes a rate of 20 percent, which would make American companies much more competitive overnight.

While the left whines about corporate profits, everyone will benefit from a stronger economy. Remember that corporations don’t actually pay corporate taxes; their customers do, in the form of higher prices. And those higher prices make American goods and services less competitive, which means they can employ fewer people and at lower wages.

Analysis by the Tax Foundation found that lowering the top corporate income tax rate to 20 percent would eventually create roughly 650,000 jobs and a 3.3 percent bump in the overall economy over the next decade or so. The resulting economic growth would lead to a roughly 3 percent increase in after-tax incomes for everyone from the struggling single mother to Warren Buffett.

Lest we forget, economic growth isn’t good just for its own sake. It’s good because it alleviates a host of problems. It means more charitable giving, rising home values, higher participation in the labor force, better wages and higher tax revenue. It puts entitlement programs on sounder footing, reduces economic stress and puts more cash in everyone’s pockets. Since the prosperity created by the GOP framework will be broadly shared, it shouldn’t increase inequality that could be politically exploited by the left.

The Tax Foundation analysis was isolated on cutting the rate and didn’t include other factors, but other sections of the GOP framework would create even larger growth.

Only two business tax credits (research and development and low-income housing) are preserved in the framework, while everything else is on the table for repeal. The tax-writing committees hashing out specifics of legislation should eliminate all the rest.

Still, the framework leaves lingering questions about the details. The GOP should be applauded for letting the tax-writing committees figure these out rather than negotiating them in a small, closed group. But it was almost 11 months ago the GOP found out they’d have unified control of the government. With all the tax experts in the GOP, it’s disappointing the process is not further along.

By this point, we should already know where the new income tax thresholds are going to fall, so that the Congressional Budget Office, Joint Committee on Taxation, and outside groups can score the fiscal and economic effects of tax reform. The framework also leaves questions about whether the expanded child tax credit will be enough to offset losses a larger family would face from the elimination of personal exemptions.

Still, the GOP tax reform framework is a great start. Here’s hoping it quickly becomes legislation then law, and thus quickly fosters economic growth and new well-paid jobs.