June 28, 2017 - Douglas Myser


GOP cutting taxes ? The GOP is supposed to be really good at cutting taxes. President George W. Bush cut taxes. So did President Ronald Reagan, though he also raised them. So why are Republicans now struggling mightily to reach a consensus on how to overhaul the nation' tax system ? And why is President Donald Trump, who has promised the largest tax cut ever, having so much trouble accomplishing one of his main initiatives ? Here are some reasons why tax overhaul is hard and why Republicans have been unable to reach a consensus. GOP cutting taxes ?

After weeks of private negotiations, the White House and congressional Republicans still don't agree on exactly what they want to accomplish. House Republican leaders are firm that they want to completely overhaul the tax system for businesses and individuals. They want to make the tax law simpler and more efficient, and they want the changes to endure beyond the next decade. They want to cut tax rates, but they don't want the changes to add to the federal government's long term debt. That means Congress would have to eliminate a lot of exemptions, deductions and credits, and probably come up with a new source of revenue. GOP cutting taxes ?

The White House is all about IRS tax cuts. Administration officials have talked about simplifying the tax system and getting rid of deductions, but have offered few specifics. Republicans are working to pass a tax plan under a procedure that requires only a simple majority in the Senate, preventing Democrats from blocking it. But to use this procedure the package cannot add to the government's long term debt. That means simple tax cuts would have to be temporary, like the ones passed under Bush. So cutting taxes is not as simple as it seems.

Why is Ryan pushing for a tax on imports ?  Ryan is pushing a plan that would increase taxes on imports and cut taxes on exports. It's called a border adjustment tax. One reason he likes it is because it would raise enough revenue--about $1 trillion over the next decade--to lower the corporate tax rate from 35% to 20% without adding to the government's debt. Cutting taxes can be quite complicated, but the border adjustment tax is a part of Ryan's plan.


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