Tax reform a waste of time without spending revamp

It’s no secret that major tax reform is high on the wish list of both the president and Congress, but months of failed efforts to repeal ObamaCare hasn’t exactly inspired overwhelming confidence that fundamental changes to the tax code are on the horizon.

There are a few reasons why tax reform will be so difficult. The likely vehicle it will be passed under — reconciliation,  a special legislative procedure that needs only a simple majority — requires that changes do not add to the deficit, and uniting Republicans around “revenue-raisers” will not be easy. 

{mosads}The problematic Border Adjustment Tax (BAT) is apparently dead in the water, but it remains unclear what other “pay-fors” will be included in a final package or whether they’ll gain enough support to pass. 

Ultimately, though, tax reform is doomed to be temporary if it ignores the reason why taxes are high to begin with — the endless spending that drives them. If unrestrained spending and debt continue after tax reform, the actual result will more closely resemble temporary tax deferrals and will create pressure for tax hikes in the future. 

Luckily, Congress has options for easing this burden and achieving lasting changes that satisfy legislators’ bases and their goals. It may not be possible to find enough spending cuts to fully offset a tax package, but legislators have an abundant menu of options. Including even small spending cuts would be game-changing for the future. 

Congress and the president would not need to find every single cut immediately, but there is plenty of low-hanging fruit if it wanted to move in that direction. As one example, eliminating improper payments, primarily in Medicare and Medicaid, could save up to $144 billion per year. 

The most important change Congress could make, however, would be structural. The fact is, most of how Congress conducts its basic processes is hopelessly outdated — cutting waste or making large reforms is next to impossible when the vast majority of federal spending is on autopilot. The tax reform process offers an opportunity to move in the right direction, if Congress wants to. 

Other scholars have suggested ideas like a bipartisan commission to identify cuts or a process to cap the growth of entitlement programs and satisfy reconciliation requirements. The options may not be perfect, but completely ignoring spending is a mistake. 

It should go without saying that many partisan Democrats will oppose any tax cut, point blank; and Republicans have been less than terrific at managing the messaging battle when their opponents attack them as favoring the rich at the expense of the poor. 

This is baffling. Love or hate President Trump, his campaign energized working-class Americans — even in long-held Democratic strongholds — and effectively messaged his efforts as a crusade against a rigged system laden with special interests. The same story can be told when it comes to tax reform. Including spending reform is a key part of telling it well. 

Incorporating budget reform into a holistic agenda aimed at fixing the nation’s finances is a no-brainer. Targeting handouts to wealthy farm conglomerates, means-testing entitlement programs or stripping out waste in healthcare programs can be combined with ending special handouts in the tax code and giving the middle class a much-needed tax break — such a package is a political and practical winner.

Ultimately, success in this effort will be driven by the president and Congress’ ability to manage the news cycle, a skill the president has mastered. The American people, no matter how they feel about Trump, want to end cronyism and backroom deals. They do want to “drain the swamp” and unrig the system. They are looking for leaders to present a clear plan for doing so. 

Moving ahead into tax reform, the president would be wise to remember the root of the problem and not cast his vision too narrowly in looking for reforms.

Jonathan Bydlak is the founder and president of the Coalition to Reduce Spending, an advocate for lower federal spending. He’s also the creator of SpendingTracker.org. He is a fiscal policy expert and also served as director of fundraising on Ron Paul’s 2008 presidential campaign. Follow him on Twitter @jbydlak and @Reduce_Spending.

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