by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Thomas Donlan of Barron’s outlines his priorities for federal tax reform.
The White House tax plan takes many steps in the right direction, but we shouldn’t be satisfied. Yes, it offers competitive corporate rates and lower personal rates, shifts to a territorial tax system that taxes only domestic profits, doubles the standard deduction, reduces the number of tax-rate brackets, repeals the Alternative Minimum Tax and the estate tax, and abolishes most major personal income-tax deductions except for mortgage interest and charitable donations. But these are steps that should be taken carefully.
The document published last week is a one-page talking-points memo, better suited to a blog post than to the construction of legislation. “We’ll get back to you with definitive answers on all these details,” said Gary Cohn, director of the National Economic Council.
The one-page tax plan doesn’t even have enough bullet points, because it doesn’t take the most important fiscal reforms. It doesn’t cut corporate taxes to zero, and it doesn’t constrain the growing national debt.
On cutting the corporate income-tax rate from 35% to 15%: We applaud the intent to ease American consumers’ burden from their most invisible and universal indirect tax. People pay the corporate income tax, but they can’t see it.
Nothing but abolition will provide the best stimulus to the economy, which is to eliminate the armies of accountants, lawyers, lobbyists, and activists who promote their special interests by tying business taxation into knots.
Only abolition can strengthen free competition by ending the handicap the corporate income tax places on established, profitable companies’ attempts to supply consumers with goods and services at good prices.