On Tax Reform, Trump’s Chasing Another Dead-End

by Cinzia Croce

The Mooch warned us. After his departure from the White House, Anthony Scaramucci granted his first interview to George Stephanopoulos and declared that Trump needed  “to move away from that sort of Bannonbart nonsense”  and “…move more into the mainstream. He’s got to be more into where moderates are and the independents are.”

A week later, we got the first taste of what a more “mainstream” Trump will be like. In his Afghanistan speech, he announced that he was going to turn his back on his instincts and campaign promises and send more troops to Afghanistan to “seek an honorable and enduring outcome.” Yesterday, we got the second taste of the New Trump, when he delivered a speech calling for tax reform that could have easily been delivered by Mitt Romney or Paul Ryan. It was full of the old Reagan Republican buzzwords like “growth” and “opportunity,” and stale, crusty talking points like “Americans know better than Washington how to spend their own money.” Trump the rebel, the insurgent candidate that took Washington by storm, is slowly morphing into just another traditional Republican politician promising more tax cuts and wars.

Trump Tax Reform

As was the case with the Afghanistan speech, the tax reform speech received polite applause. There was no thunderous cheering, like when he mentions building the wall or dissects the media attacks against him. It was a very low-energy event. The president, too, seemed bored with his speech, and couldn’t wait to get off the stage. The Rolling Stones’ “You Can’t Always Get What You Want” traditionally played at the end of Trump’s rallies was replaced with Sousa’s “Washington Post” — I guess John Kelly has his hands in Trump’s music playlist, too. The speech was also very short on details, which is surprising, since Gary Cohn – Trump’s Director of the National Economic Council – is said to have been working on tax reform for seven months. Perhaps he has been too busy pushing the nationalists out of the White House and didn’t have enough time to do his job and put together a comprehensive tax reform package.

Beyond this, what made the speech dispiriting is that we know already that there will be no major overhaul of the tax code. Trump is not the first Republican to rail against the complexity and convolutedness of the tax code. He is not even the first to declare that Americans should be able to file their taxes on a postcard. The reality is that the complexity is not an accident, Every loophole, deduction or special treatment has a constituency ready to fight any attempt to remove it. Taking on one or two constituencies is manageable, but reforming the entire code means taking on everybody at once. It means months and months of labyrinthine negotiations, likely stalemate, and, ultimately, failure.

The GOP leadership is aware of this. It suits them, since they want to run out the clock on the Trump presidency. First, they were able to dupe Trump into wasting six months of his administration pursuing the failed Obamacare repeal, and now they will have him on another wild goose chase, pushing tax reform for the next seven or eight months. After that, Congress will be on recess because the 2018 primary season will be in full swing. When the primaries are settled, they will return to D.C. for a few weeks, continue to stall, and blame the Senate Democrats any slowdown. Then they will be off to campaign for the general election. Once the mid-terms are over, Christmas will be just around the corner and just like that two years of the Trump presidency will be in the history book.

My advice to the president is very simple: pursue a corporate tax cut, increase standardized deductions, and call it a day. My preference would be to eliminate the corporate tax for companies entirely based in and exclusively employ individuals in the United States. Perhaps we could target small companies for tax relief while keeping the taxes steady on multinationals or corporations with revenues in the millions as a way to avoid the Democrats’ charge of “tax cuts for billionaires”. Such an approach would provide a boost to the economy, keep the president’s populist bona fides intact and, most importantly, can actually be achieved.

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