What Real, Honest Tax Reform Will Look Like
How Congress, Trump rework the tax code without abandoning conservative principles
Imagine going to your boss with your personal budget. The list would include things you want to spend money on, such as: your home, car, groceries, dining and entertainment projections, vacation plans, charitable giving goals, etc.
Now picture telling your boss he must fund your planned budget. You don’t bother to discuss your value to the company, but rather demand he fully fund your personal budget.
Government shouldn’t be immune from the budgetary laws of nature.
This is a difficult conversation to imagine because the real world doesn’t work that way. We don’t get paid based on what we want our personal budget to be, but rather the value we provide. Then based on what we receive, we budget accordingly. Yet, big government demands that it play by a different set of rules.
When hardworking Americans say they want fewer taxes, too many in Washington — even some conservatives — get indignant and claim the government can’t really get by on much less. Invariably, they demand that we continue to send them larger amounts of money; even that is never enough.
There’s a much simpler solution to how government budgeting should work. Government gets what hardworking Americans agree to pay them — the taxes properly collected. Government allocates up to that amount — starting with the highest priorities and moving down the priority list until the money is exhausted. Modest debt may be appropriate for the purchase of certain important long-term assets, but not for operating expenses.
These are simple financial and budgeting rules that businesses large and small and families must abide by. Only big government seems to think the budgetary laws of nature don’t apply.
Those who say, “We can’t afford a tax cut” or argue that we must “pay for” any tax cut are big government apologists even if they call themselves conservatives or Republicans. Taxpayers can certainly afford a tax cut. So I don’t know who they mean by “we.”
Government deficits are not a good reason to oppose tax reform or tax cuts. However, they are an excellent reason to require the government to live by the same budgeting rules we all live by.
We don’t have a deficit because Americans don’t pay enough taxes! We have a deficit — and a growing national debt — because our government spends way too much money! Too many proposals — even from self-identified conservatives — raise taxes on American consumers to “pay for” other tax cuts. This should be a nonstarter!
Another inane argument that passes for “wisdom” inside the Beltway is that tax cuts and tax reform should be “revenue neutral.” No, tax cuts and tax reform should reduce the tax burden on America, not simply shift it from one American to another. Government will never shrink if Congress imposes a revenue neutral requirement.
Conservatives used to support lowering taxes, not simply shifting the burden. Congress may love the idea of passing out tax benefits to preferred groups, and the power that gives them, but the people with the best lobbyists and the biggest campaign donations will be the winners. That is not a feasible or responsible way to reform the tax code.
To grow the economy, Congress must quickly pass tax reform that follows four foundational principles:
First, Congress should simplify our tax code and dramatically reduce the tax burden placed on Americans and American businesses. Government gobbles up too much of America’s economic pie.
Second, Congress should pass an actual tax cut — not merely change who pays the tax.
At the grocery store, when there is a price cut, the price of sale items are reduced for everyone — not lowered for some and raised for others. That is what big government apologists would do. Over time, reducing taxes and trimming the size and scope of government will increase government tax receipts due to a robust and growing economy.
Third, Congress must not “pay for” tax cuts by increasing taxes elsewhere! Congress must not pit one group of taxpayers against another — where we battle one another for favorable tax treatment. Everyone should get favorable tax treatment!
Fourth, government must live within its means — just like the rest of us — allocating available funds to the highest priorities. Some lower priorities may not be funded, that is how the real world works for millions of Americans. Government shouldn’t be immune from the budgetary laws of nature.
George Landrith is the president of Frontiers of Freedom, a public policy think tank.