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Leading on Tax Reform

Sen. Mike Lee (R., Utah)

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Yesterday Senator Mike Lee, the Utah conservative, announced an ambitious plan to reform taxes — much the most attractive one we have heard from any Republican for a long time.

The plan would cut tax rates, simplify the tax code, and rid it of several features that distort our economy and society. The tax increases that have taken place under President Obama would be undone. The mortgage-interest deduction would be scaled back. And the deduction for state and local taxes would be eliminated: Low-tax states would no longer subsidize high-tax ones, and the federal government would no longer soften voters’ incentives to elect less-profligate state politicians.

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Senator Lee takes aim at another form of redistribution as well: the way the federal government transfers resources from larger families to smaller ones. Social Security and Medicare, he argues, reap benefits when adults make the financial sacrifices necessary to raise children, but they tax parents as though that contribution did not exist. Expanding the tax credit for children by $2,500 per child would begin to rectify that unfairness. It might also make it possible, he notes, for some parents to scale back their work hours to spend more time with their children. Or parents could use the additional money to help their families in other ways, as they see fit.

Senator Lee makes a strong case on the merits for his plan, but its political advantages do not escape him. The promise of middle-class tax relief has helped free-market politicians get elected in the past but has not featured much in Republican platforms in recent years. In part that is because of our fiscal predicament, of which the senator is certainly mindful: It’s why he has in the past also proposed specific spending cuts, and why his plan ends tax breaks as well as cuts taxes.

With this plan, the senator has taken an important step toward limiting government, promoting growth, and creating a conservative electoral majority.



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