The GOP can deliver real results and better lives for all if they have the courage to rethink how our country taxes people.
The GOP can deliver real results and better lives for all if they have the courage to rethink how our country taxes people.
W hy are Republicans thinking so small?
Such is the reality as the GOP debates when and how to cut taxes next year. Republicans have been blessed with the White House and both chambers in Congress — and Donald Trump’s decisive victory has given them a mandate. But instead of thinking about big and bold tax-cut ideas, they’re talking about tweaks that are minor in the scheme of things.
Don’t get me wrong. The main Republican priority, extending Trump’s 2017 tax cuts, is worth doing. The incoming president’s signature economic policy spurred a remarkable era of wage growth, job creation, and opportunity, especially for the least fortunate. Making them permanent would do a world of good for decades to come. But that’s not transformative because the tax cuts are already in place. Nor are Trump’s new calls to cut corporate taxes further while also ending taxation on tipped wages and Social Security benefits. While those ideas are valuable, they’re still variations on an old theme. Republicans should offer a new theme altogether.
In fact, they should take a page out of the Democrats’ book. The last two times the Left has controlled the White House and Congress, they passed sweeping policies with far-reaching consequences. In Obama’s first two years, they enacted Obamacare and Dodd-Frank. Similarly, Biden’s first two years saw an unprecedented explosion in federal spending — mainly on corporate welfare masquerading as climate policy and job creation.
Democrats get it: When you control the levers of power, you should use them. Yet while Democrats have acted in ways that harm Americans and hold back the economy, Republicans can use their newfound power to deliver game-changing tax policies that make all Americans’ lives better.
What would a truly transformative tax-cut vision look like? Here’s an idea that already has support from conservative economists: Ditch income taxes altogether — and tax people exclusively on how much they buy. It’s called a “consumption tax,” and its benefits to Americans would be enormous.
A consumption tax is profoundly pro-work, pro-growth, and pro-family. It would end the foolish policy of taxing people based on their jobs, which stifles opportunity. That’s basic economics: When you tax something, you get less of it. So if we stop taxing the income that people earn at work, we’ll get more work leading to more income. Americans reelected Trump because they want him to deliver better jobs and bigger paychecks. A consumption tax would do exactly that, but to a new degree.
At the same time, a consumption tax would generate trillions of dollars of revenue, ensuring that government is still funded and key programs like Social Security continue to serve the millions of people who depend on them. In fact, such a tax could conceivably lead to more revenue over time. By boosting income, it would give Americans more money to spend, and as they do, they’d generate more revenue for the federal government.
An added benefit: The IRS could be dramatically shrunk or even disbanded with a consumption tax. It wouldn’t be necessary to monitor income taxes because tax revenue would automatically go to D.C. every time Americans made a purchase.
Some may think that such an idea isn’t politically feasible, especially since Republicans have such slim majorities in Congress. But a consumption tax solves some of the common problems that the GOP faces when trying to cut taxes.
Most notably, a consumption tax is harder to spin as a “tax cut for the rich” because it eliminates all the carve-outs and exemptions that the rich currently use. That’s one of the biggest problems with our income-tax system — it looks like Swiss cheese, with loopholes galore for the wealthy and well connected. A consumption tax would ditch them all, forcing the wealthy to pay higher taxes. They buy a lot more than everyone else, so they’d end up paying a lot more, too.
A consumption tax could also be designed to help the least fortunate. In Congress, Representative Buddy Carter (R., Ga.) has proposed a version that would ensure that no purchase by someone below the poverty line is taxed — period. That’s another political winner.
But the biggest political consideration is this: Voters reward parties that deliver. Democrats didn’t reap those rewards in November because their big policies turned out to be disastrous. But Republicans can deliver real results and better lives for all if they have the courage to rethink how our country taxes people.
The GOP’s window won’t last long. Trump is at his most popular now, coming off such a resounding victory and with Biden’s economic failures front and center in voters’ minds. In an environment like this, and with the White House and Congress under their control, Democrats wouldn’t think twice about trying to transform the country. Now when will Republicans stop thinking so small — and start talking about the big vision that will inspire Americans and improves everyone’s lives?