Tuesday, January 30, 2018
Wall Street Journal op-ed: ‘Repeal and Replace’ the Trump Tax Cuts, by Jason Furman (Harvard):
Everyone who debated last year’s tax law can agree that it won’t be the last word. The legislation addressed almost none of the “tax extenders,” temporary tax breaks that Congress typically reauthorizes every year. Some of the law’s key provisions expire after 2022 or 2025.
More important, the tax cuts put the country on an unsustainable fiscal trajectory, with next year’s deficit set to hit 5% of gross domestic product, a record outside of major wars and recessions or their aftermath. Finally, anything widely known as the “Trump tax cuts” is politically unstable given that Democrats will eventually take back power.
The question is how Democrats should proceed once they do. After the George W. Bush tax cuts, they focused on repealing the provisions that benefited only high-income households. That approach will not work this time. Although the Trump tax cuts are tilted toward the rich, few provisions benefit them alone.
Another problem is that repealing the law’s parts in isolation could be counterproductive. Democrats are rightfully upset about the new $10,000 cap on the deduction for state and local taxes, but eliminating it would cost more than $600 billion over 10 years, with half that going to households earning more than $1 million annually.
Democrats should instead aim for something more radical: “repeal and replace” of the Trump tax law—or, Republicans could join the process and call it comprehensive tax reform. It should have four goals: stability, efficiency, simplicity and help for American families.