Betsy McCaughey, the Republican former lieutenant governor of New York, has discovered the formula for delivering a 20 percent corporate-tax rate in January 2018, as the U.S. House of Representatives wishes, not 2019, as the Senate voted, in an act that flirts with GOP political suicide.
McCaughey, a senior fellow with the London Center for Policy Research (as am I), offers a delightfully simple plan in today’s New York Post: “This beautiful committee,” as President Trump dubbed the House-Senate panel that will reconcile the two chambers’ competing bills, should accept the House’s January 1, 2018, effective date for the corporate tax to plunge from today’s 35 percent rate to the new, paradigm-shifting, highly competitive 20 percent rate. (That’s a reduction of 43 percent.)
And how would conferees “pay for” this massive, history-making tax relief to American business, one year earlier than the Senate wants?
The conference committee should adopt the House’s $1,600-per-child tax credit, rather than the Senate’s $2,000-per-child credit. As McCaughey explains, the ensuing $150 billion savings would cover more than the roughly $127 billion one-year “cost” to make U.S. companies globally tax-competitive — and next month, to boot.
Before anyone screams that this would let tungsten-hearted Republicans gleefully “hurl America’s children under the bus,” remember: Today’s per-child tax credit is $1,000, so inserting the House language into the final tax measure would increase by 60 percent the tax credit for “the children, the children; Think of the children!”
However, this would not double that tax benefit, as otherwise free-market Republican senators Marco Rubio of Florida and Mike Lee of Utah want. In exchange for a mere 60 percent more love than today’s U.S. tax code showers on this country’s amazing boys and girls, every American — even the childless and those with adult offspring — would benefit from giving U.S. job creators their biggest tax cut ever, and in just over three weeks, not 13 months.
Betsy McCaughey, the think-tank scholar whose 1994 New Republic analysis fatally wounded HillaryCare, has worked her magic again, only this time in reverse: Rather than kill a bill that deserved to die, her simple proposal would save Republicans from a possibly recession-creating one-year delay in corporate tax relief. If her idea prevails, CEOs would be incented to hire, invest, expand, innovate, and produce until it hurts, with the full advantage of the 20 percent corporate rate — as soon as next New Year’s Day.
This would be far better for all Americans than if business owners and executives sat on their hands for twelve months, awaiting these inducements until 2019 — almost certainly slowing the economy and extending the pain of the sluggish Bush-Obama years, from which the economy at last is emerging, thanks to President Trump’s muscular deregulation and optimistic, business-friendly tone. Such doldrums would crush GOP prospects in the November 2018 midterm elections.
This great policy is also great politics.
A 20 percent U.S. corporate-tax rate, significantly below the global average of 23 percent, likely would unleash economic growth well above last quarter’s 3.3 percent GDP expansion.
Although it probably would do little for growth — aside from pregnancies — the House’s expanded child credit would give parents 60 percent more per kid than they see now. This qualifies as middle-class tax relief.
More important, a 20 percent U.S. corporate-tax rate, significantly below the global average of 23 percent, likely would unleash economic growth well above last quarter’s 3.3 percent GDP expansion. Next year’s output boost could be the firing squad that dispatches the lie that America is cursed with a stagnant “new normal,” à la Obama’s comatose 1.5 percent average annual growth.
If the economy soars next year, Republicans likely would keep the U.S. House next November. And if they maintain their existing margin and gain at least eight net Senate seats among the 25 that Democrats must defend, Republicans could win a filibuster-proof 60-vote majority.This scenario would vindicate House Democratic leader Nancy Pelosi of California: The $1.5 trillion GOP-Trump tax cut indeed could be “Armageddon,” as she called it — not for America, but for Democrats.
Beyond heeding McCaughey on corporate taxes, Republican conferees should follow her other key piece of advice: They should endorse the Senate’s proposal to make Obamacare voluntary by junking the individual-coverage mandate. Those who want Obamacare may keep it. Those who do not would be emancipated to make other arrangements without being taxed 2.5 percent of household income or $700 (whichever is higher) for not buying something that Uncle Sam demands they purchase against their will. Since 80 percent of the 6.7 million Americans who paid this tax penalty in 2016 made less than $50,000, sparing them this costly indignity also constitutes a middle-class tax cut.
Once again, Betsy McCaughey is right, as she so often is. Peace be upon her.