Paul L. Caron

Tuesday, November 21, 2023

WSJ Opinion Pieces: Tax Cuts, Tax Loopholes, And Carbon Taxes

A New Approach to Taxes That Pays Its Own Way (Op-Ed by Brian Deese (MIT) & David Kamin (NYU)):

Most of the tax cuts passed in 2017 are set to expire in 2025. Altogether, these cuts cost the federal government about $350 billion a year, or 1% of gross domestic product. Their expiration marks a milestone in American tax policy.

The tax system of the 1990s could have financed the government we have today. But two decades of successive unpaid-for tax cuts eroded our nation’s revenue base. Without those tax cuts, federal debt as a share of the economy wouldn’t be projected to rise significantly over the coming decade.

Americans can’t afford for politicians to keep having the same stale debates about tax policy. Unpaid-for tax cuts make it harder for the federal government to finance its obligations. It’s time for a new approach to taxes. ...

Given the magnitude of our fiscal challenges, we ultimately will need to raise revenue beyond paying for tax-cut extensions in 2025 and address other salient fiscal challenges, such as continuing to slow the growth rate of healthcare costs. But the greatest near-term fiscal risk the country faces is the possibility that policy makers won’t only extend the 2017 reform, but double down on these unpaid-for, regressive tax cuts. Doing so would deal a huge blow to market confidence and the economy. Tax cuts now would likely come at the expense of long-term growth and American pocketbooks.

Showing a commitment to pay for any tax-cut extension in 2025 is smart policy. It would also be a significant step toward instilling confidence in America’s commitment to meeting its long-term fiscal challenges.

Five Tax Loopholes for Mike Johnson’s Chopping Block (Op-Ed by George Callas (Arnold Ventures LLC)):

With Mike Johnson as House speaker, Republicans can return to legislating. Chief among their priorities should be tackling the nation’s dire fiscal state. That includes trillion-dollar annual deficits, entitlement programs hurtling toward insolvency, and $33 trillion in national debt. Mr. Johnson says he intends to create a bipartisan commission to study the latter issue.

Republicans will soon face a familiar quandary: Reducing deficits will require cutting popular social programs, raising taxes, or both. The party has pledged it will do neither. It isn’t, however, without options.

All but four members of the GOP caucus found an elegant solution this spring: The Limit, Save, Grow Act would have cut trillions of dollars in spending and raised $515 billion in revenue by ending many of the Inflation Reduction Act’s green-energy subsidies. By raising revenue in a way that advanced conservative principles, the party showed it could promote deficit reduction and smart politics.

The bill failed to pass the Senate but remains a useful guide. House and Senate Republicans should seize every opportunity to end tax loopholes incongruent with conservative values and direct the revenue to repairing our nation’s balance sheet. Here are five such fixes. ...

These proposals are consistent with free-market governance that benefits everyday Americans. As a political matter, advancing them would force Democrats either to join Republicans or to expose themselves as advocates for “fairness” only when their hobbyhorses aren’t at stake. The GOP would either earn a principled victory in fighting for smaller government or a policy victory by actually making government smaller.

Republicans for a Carbon Tax (Editorial):

Too many Republicans these days have lost their economic bearings. Look no further than a GOP Senate bill that would enact a carbon tariff—i.e., a new tax. In the name of punishing China, the legislation would punish American consumers and businesses.

The Foreign Pollution Fee Act, sponsored by Louisiana’s Bill Cassidy and South Carolina’s Lindsey Graham, could well have been written by the Sierra Club and AFL-CIO. Among the carbon tariff’s biggest advocates is Donald Trump’s former trade adviser Robert Lighthizer, who favors tariffs in principle. So it’s worth deconstructing the misleading arguments that Mr. Cassidy and others are making for climate protectionism.

The bill would impose tariffs on 16 categories of goods produced in countries with higher CO2 emissions than the U.S. They include steel, aluminum, critical minerals, solar panels, wind turbines, crude oil, gasoline, petrochemicals, plastics, paper and lithium-ion batteries. Companies could lobby to have products added to the list, and you can bet they will.

Tariffs would be based on a foreign good’s relative “carbon intensity,” as calculated by a new National Laboratory Advisory Board on Global Pollution Challenges. The bill would expand the administrative state by creating a new bureaucracy with sweeping powers that would be hard for future Congresses to rein in. ...

Some of the GOP’s strongest supporters of free trade and markets have recently retired, and the party’s protectionist wing is on the rise. But the GOP won’t be worth a dime’s worth of economic difference from Democrats if it embraces an idea that expands the administrative state, raises taxes, and increases prices amid damaging inflation.

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