The Problem with the GOP Tax Plan: It's an Entitlement Instead of a 'Deal'
Trump and the GOP should look at tax reform as a "deal" instead of an overdue entitlement. For years, Republicans have been loath to hand over their “hard-earned money” to the federal government on April 15th, even though they benefit as much—if not more—than most Americans from the services the government provides.
Many in Congress have even taken a pledge concocted by Grover Norquist of Americans for Tax Reform never to raise taxes or eliminate tax loopholes. In effect, many Republicans have come to see tax reform as a right, on a par with free speech and other constitutional mandates.
There’s no doubt that a tax code that totals more than 10 million words needs reform—or at least a good editor. It costs American businesses a bundle in accounting, compliance, legal, and auditing costs. And none of those expenditures go toward productivity; they’re defensive and self-protective.
Still, there are likely to be winners and losers in the GOP plan, and one obvious loser is the U.S. Treasury. The Committee for a Responsible Budget estimates the deficit will take a $2 trillion hit over the next decade, a number that is vigorously disputed by the Trump team.
If the bill does pass, what does the country get in return for all this largesse? Job growth? An increase in the tax base from 53 percent to say, 60 percent? Higher wages for those who have jobs? Doubtful, since artificial intelligence and automation is rapidly replacing blue, white and brown-collar jobs throughout the country.
Passing the GOP bill as it's presented will almost certainly be a non-starter. So here are a few ways Congress can turn this new tax entitlement into a smarter tax deal:
- Large corporations, with 5,000 or more employees: In exchange for the lower 20 percent rate, these companies would institutionalize apprenticeship programs across all their divisions for community college students, night school students and others who qualify. The ratios would be determined by some flexible formula that accounted for the companies’ earnings, costs, location, and any other factor that would make it fair and accountable.
- Small corporations and pass-through's that hire minimum-wage workers would be required to raise those wages by, say, 7 - 10 percent, depending on location and earnings -- again, a formula for the Bureau of Labor Statistics to calculate.
- Individuals and/or households with windfalls of $500,000 or more would have two choices: Repay the country by devoting a prescribed number of hours of community service, based on a formula of dollars saved and other factors; or give a percentage of that money to charities, which would be tax deductible the following year. The list of community services could be wide and deep, including teaching English as a second language, driving patients to and from hospitals to get chemotherapy, dialysis, or other life-saving treatments, planting a community garden, or other worthy endeavors.
- Estate beneficiaries: This is tricky. Everything above could apply to an inherited business; the taxes on securities remain the same in the proposed tax plan; so, we're talking primarily about property and cash.