Politics

Following the Healthcare Debacle, Is Trump’s Proposed Tax Reform Already Dead in the Water?

“Not only did Republicans lack a replacement plan, they couldn’t even agree upon a basic replacement ideology.”

Will the Trump administration be able to achieve tax reform? Trump has proposed tax cuts for every income bracket, and especially top earners. He is also targeting a corporate income tax of 15%, versus the top 39.1% it’s at now. At the moment, however, the prospect of tax reform looks like a long shot.

If things had gone according to President Trump’s plans, Republican health care efforts would already have been voted into law, and Congress would be pivoting towards tax cuts. In fact, health care reform was intended to pave the way for tax reform. The cost savings created by health care reforms were supposed to make expensive tax cuts more palpable.

That didn’t happen. Republican plans for health care reform have imploded, leaving a pile of political wreckage strewn across the Capital. For years Republicans have lambasted Obamacare, and with good reason, the system contains many faults and without repeal or reform, it might simply collapse under its own weight. All the while, Republicans claimed that they’d replace Obamacare with something much, much better.

Only they didn’t. Not only did Republicans lack a replacement plan, they couldn’t even agree upon a basic replacement ideology. Obamacare was driven by beliefs in expanding health care coverage for the uninsured, and making costs lower for the most vulnerable, namely the sick and the poor. Republicans, on the other hand, stood divided. Some hard lined conservatives felt that the GOP replacement plans didn’t go far enough, others felt that it went too far. Without consensus, repeal was impossible. GOP efforts collapsed not because of any Democrat resistance but instead because Republicans couldn’t muster internal consensus.

Will GOP efforts at tax reform suffer a similar defeat? Could tax reforms plans already be dead in the water? We already know what the GOP wants to do: cut taxes. Who should benefit from these taxes will be debated. Moderate Republicans and even some Democrats might support tax cuts for working and middle class Americans. It will be harder, however, to drum up support for tax cuts for the wealthy.

Why? The United States is already facing deficits and an ever growing mountain of public debt. For years now, both Republican and Democrat controlled governments have kicked the fiscally-responsible government “can” down the road, funding yesterday’s wars and stimulus packages with tomorrow’s tax revenues. Any debt accrued today is going to have to be paid, and that means future generations will likely end up footing the bill.

Tax cuts on the wealthy will almost certainly increase deficits and public debt. Republican leaders have argued that tax cuts will lead to such rapid economic growth that it’ll actually produce more income. However, such trickle-down economics was already largely disproven under the Reagan administration, which was forced to increase taxes after cuts failed to produce the hypothesized leap in tax revenues. It should be noted that Reagan still cut taxes sharply from the levels seen before his administration.

More recently, efforts in Kansas to cut taxes have resulted in a public finance crisis, with the state sinking deep into debt and being forced to make dramatic cuts to basic public services, such as education. Since 2010, Kansas has added more than $2 billion dollars in public bond debt even as the state has made steep cuts to public services. Tax cuts were supposed to lead to a booming economy, but instead Kansas is struggling to keep up with national average GDP growth. This year, Republicans in the state house rebelled to push through tax increases, and even overrode Republican governor Sam Brownback’s veto.

In spite of the failed Kansas experiment, Republicans in Washington have borrowed heavily from Kansas’s tax reform efforts. However, with Medicare, Medicaid, and Social Security costs projected to rise steeply in the future, the Federal government might not be able to afford extensive tax cuts. Had health care reform gone through and secured savings, the GOP might have more room to work with. As it stands now, America’s finances are already in bad shape, and tax cuts without reform and reigning in spending will only lead to further damage of its fiscal health.

Brian Brinker

Brian Brinker is an OpsLens Contributor and political consultant. Brinker has an M.A in Global Affairs from American University.

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