Being Right: Sparking Economic Activity

From the early days of the Obama presidency, comprehensive tax reform has been a major priority in Washington, D.C. Speaker Paul Ryan has crafted proposal after proposal regarding the federal tax code, and both Democrats and Republicans generally agree that the federal tax code needs to be significantly improved, given the number of tax loopholes, deductions, credits and exemptions that have added to its complexity since the bipartisan Tax Reform Act of 1986. Although the healthcare-reform effort was largely unsuccessful, President Trump has a rare opportunity to successfully push a comprehensive tax reform package through Congress. After all, the current president was a successful businessman, has often talked about igniting a new era of economic growth in the United States and rode an unprecedented wave of populism to the White House, supported by blue-collar workers who have been negatively affected by the forces of recession and globalization.

President Trump is genuinely aware that the tax code is overly complex and needs to be radically simplified so that it can spark economic growth. Unlike the issue of healthcare reform, in which the president deferred to Ryan, Trump has proposed some good tax reforms and has made clear that he would pursue certain changes to the tax code consistent with fiscal conservatism – lowering personal income tax rates, lowering corporate income tax rates, broadening the base and eliminating tax loopholes. He understands that at a time in which many companies have moved their operations overseas, it is absolutely essential that the tax code be reformed in a manner that allows businesses to keep the bulk of their profits and revenues, so that they can invest in the American workforce and expand their business operations in America. Furthermore, Trump understands that the American worker, however wealthy or poor, lives in a free country, and should rightfully keep more of their hard-earned money in their pockets.

The main objective of tax policy is to spark, not retard, economic activity, so that the government can be able to have adequate revenue in its reserves to fund essential services for the American public. Tax policies should never be put in place for purposes of income redistribution because the tax system serves all Americans across all tax brackets and socioeconomic classes. I believe the nation needs a new tax code that is simple, fair and encourages business activity, allowing the United States to compete with other nations in the context of the current global economy.

It is hopeful that after the bungled healthcare reform effort, President Trump has now learned more about how the legislative process works in the nation’s capital, and can lead a comprehensive tax reform effort himself, within a reasonable timeframe. Given the divisiveness of the 2016 presidential campaign and the weak economic recovery, it is incumbent upon the new administration to put forth a fiscally responsible tax reform proposal that adds little or nothing to the deficit. No other policy issue has the potential to encourage economic activity like tax reform. If President Reagan could work with Speaker Tip O’Neill to pass the bipartisan Tax Reform Act of 1986, surely President Trump can work with Speaker Paul Ryan and Majority Leader Mitch McConnell to pass, at the very least, a limited tax reform that will help spur job creation and business growth, creating the conditions for a new era of economic expansion that will benefit all Americans.