Thursday, April 27, 2017

Trump's Fairy Tale Tax Plan

Like House Republicans, Der Trumpenführer is utterly desperate to get some form of legislation passed and to change the topic of conversation away from Russiagate.  Whenever talk about his possible treason and collusion with a foreign enemy heats up, something is floated to distract the  media which continues to suffer from something akin to attention deficit disorder.  Trump's tax reform proposal is a case in point.  The fact that it is based on fairy tale claims and assumptions is not relevant so long as it changes the topic of conversation.  The "plan" also underscores that Republicans have learned nothing since 1980 when Reagan promised that tax cuts would pay for themselves.  They didn't and the deficit ballooned. An op-ed in the Washington Post by the director of the Congressional Budget Office from 2003 to 2005 eviscerates Trump's "tax plan."  Here are excerpts:
President Trump is correct to press for tax reform, correct to argue that corporate rates should be reduced and correct to look for policies that boost the United States’ anemic economic growth rate. But the “rough draft” of Trump’s tax plan, rolled out at the White House on Wednesday, falls short of being a real tax reform suitable to tax-cutting conservatives such as me.
Proposing trillions of dollars in tax cuts and then casually asserting that such a plan would “pay for itself with growth,” as Treasury Secretary Steven Mnuchin said, is detached from empirical reality. A real tax-reform plan would include specifics on how to broaden the tax base — not leave that hard work to Congress. A responsible tax plan would not ignore the threat of increasing a national debt that is already on an unsustainable course.
Accelerating the pace at which the federal budget bleeds red ink must be avoided, and building a tax plan based solely on the premise of future economic growth is dangerous. Sailing straight into a sovereign debt crisis is not a pro-growth strategy. What firm would want to headquarter in a country that is toying with financial meltdown accompanied by emergency austerity and tax hikes?
Typically, the Office of Management and Budget and the Congressional Budget Office analyze the economic growth potential of proposed policies through “dynamic scoring.” . . . . never has a dynamically scored analysis concluded that a proposal would “pay for itself with growth,” and no serious economist would make such a claim. At best, according to the prevailing consensus, the positive feedback effect from tax cuts would recoup in the range of 25 to 35 percent of the cost.
Real tax reform, however, takes on tough choices to broaden the base and is not built on implausible claims for the impact on growth. Congress has a rare opportunity to boost American competitiveness and productivity growth with a sensible tax-reform package. But that package must be built on realistic growth assumptions, not economic fairy tales.

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