Chance for GOP to Lead on Tax Reform


Emboldened by their rout of Republicans after the “shutdown” flop, Democrats are demanding $50 billion in new taxes to offset getting rid of cuts in sequestration.

From The Hill:

Democrats say they would not accept any budget deal unless it includes tens of billions in new tax revenue. Their opening bid is $1 in new taxes for every $1 in spending cuts to offset the cost of ending sequestration for domestic and defense discretionary spending programs.

With this kind of pressure launched against Republicans, conservatives, and the American people in general, Tax reform may finally take front-and-center in Washington, if proponents of reform go on the offensive.

Two op-eds, one in The Hill and one in Politico, agree. From the former:

Third, the corporate income tax misallocates human capital. Joseph Stiglitz, former chair of the Council of Economic Advisers and World Bank Chief Economist, writes, “Google and Apple hire the most talented lawyers, who know how to avoid taxes staying within the law.”

Fourth, the corporate income tax includes billions in tax expenditures every year. Tax expenditures, as defined by the Budget Control Act of 1974, are revenue losses attributable to provisions of the tax laws that allow a special exclusion, exemption, credit, deduction, preferential rate of tax, or deferral of tax liability. In fiscal year 2013, the Joint Committee on Taxation estimates that corporate tax expenditures accounted for $150 billion.

Fifth, profits from C corporations are currently subject to double taxation. That is, shareholder distributions are taxed once as corporate income according to the corporate tax system and again when profits are distributed to shareholders according to the individual tax system.

The corporate tax has always been a bad idea – it punishes consumers and employees, not the corporations themselves – and the Politico article expands upon the excellent arguments from The Hill:

The resulting flow of jobs and businesses to America’s international competitors has taken its toll. Ernst & Young recently estimated the U.S. gross domestic product to be 1.2 percent to 2 percent lower in 2013 than the year earlier because of the high corporate tax rate. And it gets worse: The U.S. economy is expected to be 1.5 percent to 2.6 percent smaller as other countries embrace competitive corporate tax rates at this nation’s expense.

Misallocation of capital, a slower-growing economy, unfair loopholes and other special treatments via the currently convoluted tax code – and all many Democrats want to do is make things worse.

There are many solutions to the nation’s broken tax structure; a flat tax or national sales tax are examples of viable reform. Reforming the corporate tax code to eliminate loopholes and lower rates is the first step to larger tax reform, something both parties should be able to agree on. Republicans – and the American people – have much to gain by taking the lead on revamping the tax code.