It is garbage for one simple reason. It ain’t reform.
You can slap lipstick on a pig, but you know what? It’s still going to be a pig, no matter how hard you squint and imagine that pig as something else entirely. When your framework for “tax reform” fundamentally leaves the current progressive tax system in place, regardless of the deductions and rate reductions, it’s still not reform.
It’s Time for Clarity
If reform is our aim, what we are actually striving for and working towards, then we have to get our definitions straight. Tax reform is the fundamental restructuring and replacement of the current tax system into a system that is completely different in every way from the current mess. Tax relief is tinkering and manipulations of the current system in hopes of getting a better economic outcome, but nothing fundamentally changes.
The politicians and the “tax experts” will tell you “tax reform,” and by that, they mean “tax relief,” is about economic growth and job creation. They may throw in a simplicity and a fairness, but growth and jobs are their primary focus. This view is based on a philosophically flawed premise. It is an assumption that the government can create or cause growth in the economy to create jobs by simply tweaking and tinkering with the tax code here and there.
The Left and the Right vs. the Austrians
The political Left frames this premise in terms their socialist base understands. They advocate for a “middle-class tax relief” of a more progressive tax code that creates a more shared, collective economy. The political Right focuses more on the supply-side and frames the premise around private sector job growth, small businesses, and growing the economy out of debt. Ask Presidents Reagan and Bush 43 how their robust periods of economic growth raised our nation out of debt. Oh wait, we didn’t, our debt has steadily climbed, irrespective of our economic growth rate.
But the premise remains constant, no matter which political direction.
Hayekians pursued fundamental tax reform, a complete overhaul of the system and replaced it with something else entirely (preferably something with a smaller government footprint). We view the economy as a living organism of everyday people, regardless of class, making decisions that govern their economic lives and activities. Austrian economics rejects the notion that economies are essentially machines that can be manipulated by a central planner to spur growth and create jobs.
In Pursuit of Real Reform
Tax reform isn’t about economic growth and job creation. It’s about the size and scope of the government the people desire, and the political nature of funding that government. The fundamental principles of real tax reform should be constitutional governance, simplicity, and a minimal tax burden on the people and businesses.
Fundamental tax reform must recognize that taxes are the legal confiscation of property to fund the necessary, limited functions of government. Therefore, the less the people pay in taxes, is not the government giving the people more to spend, it’s the people keeping more of their property. Taxation that funds functions of government beyond its constitutional, legal limits is called theft and is against God’s Law. A low tax system that is simple, universal, and flat is a government taking less of the people’s property.
Republicans’ framework for tax reform is chock-full of good ideas about modernizing the taxation of business. Its provisions for the individual tax code are more of a work in progress. The corporate tax rate, now higher than those of other advanced countries, would drop to below the average.
Among the biggest unresolved issues is how exactly to pay for a tax cut plan that could mean $2 trillion less in revenue over a decade, even when accounting for base broadening efforts. And another crucial detail is where lawmakers will set the break points for a new set of tax rates.
But that’s just the beginning. Here are four other things that we don’t yet know:
White House financial advisor Gary Cohn dodged reporters’ questions Thursday about whether the new GOP tax cuts would benefit Trump and his family, instead saying “I think what the American people are concerned about their own financial position.”
Final Thoughts: A Tiny Improvement for Immediate Relief
However, we have to govern and provide temporary freedom and relief from government taxation for working families, single-parent homes, and small businesses. First, we should promote marriage, so there aren’t single-parent homes. But regarding short-term “tax relief,” the immediate next step are the principles: simplicity, lower rates, and lower tax burden, within the current progressive income tax system. The government is still stealing your property, but at least they are stealing less until real “tax reform” happens.
This is why the GOP-Trump tax relief framework is merely garbage, not a raging dumpster fire of the Democrat proposals for more taxes and more spending. It’s a tiny step towards providing the right kind of relief, while we patiently (or impatiently) wait for politicians never to fundamentally reform the tax system. Let’s wait and see how much the GOP and Trump turn this small step forward into yet another raging dumpster fire giving the Democrats everything they want and more.