Oct 29, 2017 5 min read

In September, President Trump presented the Republican tax plan. There is a need for tax reform, and the time is right. Since the adoption of the 16th Amendment in 1913, which allows for an income tax, significant reforms have been enacted approximately every 32 years. After some uncertainty in the first few years, the tax’s basic structure was set in 1922, then reformed in 1954, 1986, with 32 years later being 2018.

But the Republican plan is not the right plan.

Edwin R. A. Seligman, an early tax scholar, described a good tax system as being transparent, simple and fair. Our current tax code, which has thousands of pages, is anything but. When taxes are complicated, not only do they require vast resources for compliance – in 2015, Americans spent more than 6 billion hours, $10.1 billion in fees to tax preparers, and $2 billion more for software to do their taxes – but complexity also means that those with the necessary resources can often exploit the tax code’s complexity unfairly, while people who aren’t looking to exploit the system are often forced to hire an expert just to pay what they owe. A good reform bill would allow people to “submit their taxes on a postcard,” a popular Republican goal, or even have the government complete your returns, as is done in many other countries.

Nobody likes to pay taxes, but as Supreme Court Justice Oliver Wendell Holmes declared, “Taxes are the price we pay for civilized society.” Without tax revenue, the government could not function, and while people certainly disagree with how much government should cost, eliminating government is not realistic. Fiscal conservatives want to reduce government spending, but no one likes to be associated with cutting popular programs, so that’s a hard sell; more recently, they’ve adopted a strategy of cutting taxes first, then declaring that they would be paid for by eliminating “waste, fraud, and abuse,” some program, or closing some tax loophole to be named later. Another recent strategy has been to reduce tax revenue in order to force Congress to cut spending, but this has not worked; it has just added to the deficit.

When he was vice president, Dick Cheney famously asserted that “Reagan proved that deficits don’t matter,” because President Reagan cut taxes while dramatically increasing defense spending, which exploded the deficit but did not seem to hurt the economy. To some extent, deficits don’t matter; as long as U.S. Treasury bonds are considered a safe investment, the United States can borrow seemingly as much as it wants, and up to this point, that has been the case. But at some point, deficits will matter. If investors lose faith in the financial stability of the U.S. government, they will stop buying bonds, or demand more interest to compensate for the greater risk, driving up interest rates, and forcing the government to spend less, both of which would hurt the economy, probably dramatically. Ironically, under President Obama, congressional Republicans argued that deficit reduction was the priority, and used that to oppose almost every program he put forward, even the stimulus. But now that a Republican is in office, the deficit doesn’t matter once again. It is estimated that Trump’s plan will cost $2.6 trillion in lost revenue over 10 years.

The problem with Trump’s plan is that instead of a revenue-neutral reform that’s focused on simplicity, it is primarily at tax cut for the wealthy. Unfortunately, cutting taxes is the Republican answer for every problem. When President Clinton raised taxes in the 1990s and the government actually ran a surplus, Republicans argued that the government didn’t need the revenue so cutting taxes was only fair. Under President George W. Bush, when the economy stalled and deficits returned, Republicans argued that tax cuts would spur the economy and increase revenue. The common theme among the various iterations of the Republican plan to “repeal and replace” Obamacare was a tax cut for the wealthy. Now, after eight years of moderate growth, the Republicans want to cut taxes to stimulate the economy. Tax cuts, like government spending, are a short-term stimulus, but when implemented at the wrong time, they add to long-term deficits.

The Republicans should stop bending themselves into pretzels to justify cutting taxes, and just be honest: they want to cut taxes for the rich because that is one of the main reasons their wealthy donors support them. Under this plan, people making over $732,800, the top 1 percent, would save $130,000. The possibility of such valuable tax cuts may be why many in the GOP establishment who clearly don’t care for Trump are willing to put up with his unorthodox behavior. Of course, honesty would also require that they admit that while the wealthy members of their party would undoubtedly be better off financially with a tax cut, the working-class voters who helped elect Trump would not be; people who make under $48,600 would save $290. Having an extra $5.57 a week to spend may seem like a benefit, but not if it costs you your health insurance subsidy.