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Ryan Should Take President Trump’s Suggestions On Tax Reform

One of the problems with the current tax reform process is that the White House has put its faith in Paul Ryan and Mitch McConnell to use “regular order” to develop the bill to achieve three very broad goals:

  1. A Corporate rate of no more than 20 percent.

  2. A tax cut for middle-income earners.

  3. A simpler tax code and filing system.

Regular order means no more writing the bill behind closed doors in the Speaker’s office. It means hearings Trump tweetand mark-ups where amendments are considered and voted on openly and a floor process that allows for amendments to be considered by the whole House.

This sounds good on paper and as a rule we wholeheartedly support regular order – indeed his commitment to regular order was one reason we supported Paul Ryan’s opponent, Daniel Webster, for Speaker.

The problem is that Ryan and McConnell are genetically incapable of doing anything by regular order because they consider themselves to be the two smartest guys in the universe, and everyone else – especially President Trump – is an idiot in their minds.

This has led to a situation in which there appears to be a regular order process, but in reality, Ryan and McConnell appear to be calling all the shots behind the scenes.

The result has been a messy and incoherent bill that is politically unpalatable, especially to conservatives, and appears to be well on its way to missing at least two of President Trump’s three goals: it provides little if any relief to middle-income earners and it does not appear to simplify the onerous tax code and IRS regulations.

Don’t get us wrong, there are some good things in the House bill:

The House version of the bill proposes a doubling of the death tax exemption, to $10 million from $5 million, beginning in tax year 2018 and repealing it beginning in tax year 2024.

The child adoption tax credit, originally cut from the bill is now back in.

The passthrough rate has been lowered a change to the small business provisions of the bill that won the support of the National Federation of Independent Business (NFIB), which had harshly criticized the original text.

The bill also includes a proposal to modify the Johnson Amendment, the 63-year-old law depriving Christian groups of their first amendment rights and that President Trump campaigned against.

The bill also tightens rules for claiming the child tax credit. Filers would need to provide a “work-eligible Social Security number” rather than just a taxpayer identification number in order to claim the credit, thus eliminating claims by illegal aliens.

The bill also makes the 20 percent corporate tax rate permanent, which is a major incentive to job creation.

Job creators are expressing optimism about the bill: The American Trucking Association said, "We are pleased to see this framework now embodied in the Tax Cuts and Jobs Act, to the benefit of workers, small businesses and families across the economic spectrum."

The National Association of Manufacturers also said it was pleased with H.R. 1, which it called "a grand slam" for the U.S. economy.

"These tax cuts will make a real and positive difference for middle-class Americans, creating more wealth for higher wages, to reduce the cost of living and to increase savings for retirement and the future," Jay Timmons, NAM President and CEO, said in a Nov. 2 statement.

But there are a lot of problems with the bill, not the least of which is it has four brackets, instead of the three originally proposed, and it eliminates – in the name of simplification – many middle-income deductions.

The Trump White House has belatedly realized that the bill is drifting and that someone needs to refocus the House back on those three original goals, so yesterday, the President made two suggestions that could begin to put the bill back on track.

First, he suggested that the House should lower the top marginal rate, which would solve the looming impasse over the limits on the deductibility of state and local taxes.

Second, he suggested that Congress repeal the individual mandate in Obamacare, which would provide an offset for revenue lost that fulfills the House’s self-imposed limit of a $1.5 trillion deficit over 10-years, which seriously affects the ability of Congress to cut taxes without cutting spending.

These are two sound suggestions that would help the House get the votes to pass the bill, and they are supported by principled conservative organizations, such as our friends at the Club for Growth.

Club for Growth President David McIntosh issued a statement saying in part, “Club for Growth urges the Rules Committee to amend the Tax Cut and Jobs Act to include both of the President’s suggestions.  Once incorporated, the House should pass the bill and send it to the Senate for further improvements.”

We would prefer to see bigger tax cuts accompanied by spending cuts, but absent that, we agree with our friends at the Club for Growth – include President Trump’s suggestions in the final House bill and send it to the Senate for further improvement.

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