One of Trump’s campaign promises was to reduce taxes. Our corporate income tax rate is one of the highest in the world so there’s certainly a reason to reduce it to encourage more businesses to do business in America. But the existing loopholes which permit some corporations to pay no tax must be closed. All must pay their fair share.
The personal income tax is quite another issue. There was a time when Republicans were empowered by supporting a reduction in personal income tax for everyone; and, with the implementation of Reagan’s plan, the average income tax paid by middle income workers was cut in half. But the times have changed and the wealth gap has widened. It’s the rich who have benefitted most from income tax reduction as they take advantage of numerous loopholes in the law that allow some of them to pay much less tax as a percent of income than the working middle class. The Democrats have lost no time in pointing out the wealth gap is widening and focused on how much the rich are getting away with and how the Republicans have historically always protected the wealthy and how their new budget proposal and proposed income tax reform support their argument.
From the comments I see on the social media, my guess is that the working middle class that put Trump in office no longer prioritizes reducing income tax in the same way the young Reaganites focused on this issue. What worked for Ronald Reagan won’t work with Donald Trump. He may be clueless, but the fact is that income tax cuts are no longer seen as a means to attaining political power. That train has left the station and Republicans need to be aware of that reality if they want to say in power.
According to Ross Douthat and Reihan Salam, co-authors of The Grand New Party, “the Federal income tax, the great bete noire of tax-cutting conservatives, is no longer Middle America’s worst nightmare. ” From my own experience and reading on the subject, it’s obvious to me that a growing number of people in the working middle class are being influenced by what the Democrats are selling and are becoming more concerned that the rich aren’t paying anywhere near their fair share of taxes to support our government. No political party can survive once the majority of voters determine that party only supports a wealthy minority and ignores their needs. So then, the Republicans in Congress who are working on income tax reform need to change the image of protecting the wealthy which Democrats have laid on them and do whatever is necessary to focus on helping the working middle class or they will lose their new power base and their influence in this government for the foreseeable future.
Douthat and Salam advise the Republican Party to reform our tax system to mitigate the inequality and close the wealth gap. This means we need a reduction in the payroll tax for the working middle class and balance the loss of income by extending the eligibility requirement out further so those earning more will continue to pay a payroll tax. A still more radical move would be to completely eliminate the payroll and income tax and replace them with a progressive consumption tax, in which workers would be taxed on the difference between their income and their savings. Obviously, the authors state, this would have to be a long-range goal, not an immediate objective.
The authors generally recommend that advise that “the exemptions, deductions and rebates that make the system progressive would be chosen with the interests of the American family uppermost in mind. A generous personal deduction, and of course a generous child tax credit would protect working-class parents.” The Trump plan at least includes a doubling of the personal deduction.
The authors admit that such reforms would not benefit everyone, but they would serve the greater good: enable middle income families to have more security. The authors conclude by saying, “Above all, like all of the reforms we’ve proposed, it would benefit parents with children, the people making the most significant investment possible in the American future and the people most deserving of government support.” It’s now or never for the Republicans. Listen to your working middle class constituency; don’t give them back to the Democrats. Do it right, or you’ll have squandered a great opportunity.
The Cabana Chronicles 