Big Government “Off Sets” Will Stymie the Reagan Revival

 In ECONOMICS, NATIONAL, Trump

You can’t be for big government, big taxes, and big bureaucracy and still be for the little guy.

Ronald Reagan

Obamacare repeal was supposed to be an easy lift. For seven years, every Republican in Washington pledged to repeal and replace the law that has greatly damaged our health care system.  Yet when it was time for a vote, political and legislative realities hit them in the face.  Enacting legislation, even when in the majority, is never easy.  While the GOP is pledging the revisit the issue, others are now shifting their attention to tax reform. 
Newsflash:  Tax reform won’t be easy either.  And if some members of the Republican Party demand a “revenue neutral” budget plan or significant “offsets,” the bill may be doomed from the start. 
 
Let’s remember, the most successful tax cuts in American history – the Reagan tax cuts of 1981 – were not offset and were certainly not revenue neutral – at least in the way that bureaucrats do the counting.  
 
Congress and the budget process is often shackled by the Congressional Budget Office (CBO), which refuses to account for economic realities.  When Reagan cut taxes the CBO originally scored it as a revenue loser, but when government takes less money from the American people, the economy improves.  When the economy improves, people make more money, and guess what? They end up paying more in taxes. 
The Reagan Economic Recovery Tax Act was an across-the-board 25 percent reduction in tax rates.  The Reagan tax-rate reductions increased tax revenues from $500 billion to $1 trillion by the end of the 1980s.  Despite the evidence that tax reduction spur economic growth, some “deficit hawks” seem to demand offsets to “pay for” the tax cuts.   In recent years, such offsets have been disastrous to the American people and the economy. 
 
Andrew Quinlan of the Center for Freedom and Prosperity has looked at some recent examples of bad policy adopted solely for the benefit of the bookkeepers at the CBO. He noted that the infamous FATCA rules, which treats Americans who live and invest abroad, as near criminal suspects, were adopted for that reason.   
Likewise, initial drafts of tax reform, which President Trump now champions, contained an offset called “accrual accounting,” which taxed phantom income.  He noted the provision would require partnerships, personal services companies, and pass-through entities to use what is called accrual accounting rather than the cash method. This would have required the affected businesses to pay taxes on the money they’re owed, not the money they’re paid. 
 
If the GOP gets bogged down in provisions to rob Peter to pay Paul, tax reform won’t be passing anytime soon – and it would be their own fault.  Since President Obama was elected, the economy has been burdened with regulations, tax increases, and red tape that has stifled economic growth and prosperity.  Investors have been banking oCongress getting its act together to enact comprehensive tax reductions for American families and businesses.   
 
My advice is simple – play by our rules, not theirs.  Cut taxes.  Reduce the tax burdens of the American people. Shelve hair-brained schemes like accrual accounting and FACTA whose sole purpose is to please the accountants at the CBO.  Follow the Reagan model.  It has a proven record of success.  

 

 

Recommended Posts

Leave a Comment

Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.