The GOP Tax Bills Are Passable Policy But Philosophical Train Wrecks

train wreck Shurtterstock/Dmytro Balkhovitin

Jennifer Grossman CEO, The Atlas Society
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Politically, Republicans know that to retain control of both houses of Congress, they must deliver on at least one of their promises. That means all GOP hopes now hinge on tax reform, and prospects look good. Unlike the Obamacare repeal fiasco, there’s nothing in either House or Senate tax reform bills that would trigger libertarian-leaning Republicans — like Rand Paul — to take a principled stand against legislative passage.

But avoiding opposition is not the same as inspiring enthusiasm.  And those of us, like myself, who have long dreamed of a holy grail of a flat — or at least flatter — tax code, both bills fall short. The fault lies neither with the economists nor the politicians who’ve crafted a basic reform plan that will deliver on both economic growth and election promises to lower middle class taxes.

Instead, the fault lies squarely with people like me — people whose job it is to make the case for capitalism on philosophical grounds. Until proponents of capitalism challenge the dominant egalitarian definition of “fairness” with a social understanding which demands equal treatment of individuals, the fight for a flatter and fairer tax system will remain a political pipe dream.

According to a recent CNN poll, majorities of voters still oppose key provisions of the tax reform plans: 52 percent oppose lowering the corporate tax rate, 56 percent oppose ending the inheritance tax, and 52 percent oppose eliminating state and local income tax deductions.

Why? Because notwithstanding the election of a billionaire businessman president, envy-driven egalitarian values continue to drive political passions.

This is especially true for young voters, for whom the height of idealism is social justice. It hardly stretches the imagination to believe that without the corruption of the Hillary Clinton campaign, the United States of America would now be governed by avowed socialist Bernie Sanders.

As a short-term political strategy, the GOP tax reform plans make sense. Republicans are betting the farm on a basic tax reform package which would juice the economy significantly going into 2018 — and buoy confidence in the GOP as the party that will deliver growth and jobs.

Economically, the GOP plan would deliver on this strategy in three main respects:

It would incentivize immediate capital investments in things like factories and equipment by replacing depreciation with expensing — e.g. spend five million on trucks and you can expense and deduct the investment right away, rather than deducting the depreciated value over time.

It would bring back home trillions in offshore investments — by moving to a territorial tax system (like most other countries have) and ending the penalty against repatriating profits back to the United States.

It would create jobs and increase wages by boosting after tax revenues by roughly 25 percent (both House and Senate versions cut the corporate tax rate from 35 percent to 20 percent).

Nevertheless, the long term fundamental political challenge of tax reform will remain Sisyphean as long as it must be waged against prevailing cultural currents. And that culture will not be changed until we recognize the role of philosophy in informing values.

The opponents of even this relatively modest tax reform bill will fight not with facts and figures. They will appeal to envy and by claim the moral “high ground.” They will frame the debate in terms of fairness, and in terms of duty — to help the needy, to educate “our” children, etc. And it is in terms of fairness that those opponents should be challenged — fairness not defined by a state-enforced duty to others, but fairness to be treated as individuals, equal before the law.  Individuals — neither owed nor owned — by government.

“When men get into the habit of helping themselves to the property of others, they cannot readily be cured of it.” This prediction was made over a hundred years ago, by– of all people –the editors of The New York Times, in opposition to the 16th Amendment, introducing federal taxation of income.

The truth of the statement has been borne out by a century of fact.  Now, and going forward, this sentiment must be fought — not merely by fact, but more fundamentally, by philosophy.

Jennifer Grossman is the CEO of the Atlas Society and a former presidential speechwriter. She was also Senior Writer for the National Commission on Economic Growth and Tax Reform and author of its final report, “Unleashing America’s Potential,” in 1996.