The Corner

Senator Lee on Tax Reform

In a thoughtful essay published today by The Federalist, Senator Mike Lee, Republican of Utah, outlines a vision for tax reform:

Tax reform should not be about accepting the broken status quo, and just skimming off the top of the global economy for political redistribution. President Obama tried that. Nor should it be about shutting down the global economy with a zero-sum trade war that would hurt us far more than it would help.

Rather, our goal should be to harness globalization to the interests of American workers, to bring the global economy here rather than sending the American economy abroad. Under this framework, free trade would no longer be a mixed blessing for working Americans. It would work for all Americans, both as consumers and as workers. President Trump could even kick off this new era with a new trade alliance with Prime Minister Theresa May and our brave friends in post-Brexit Great Britain.

The senator continues:

The bottom line is that federal tax policy, like all federal policy, should serve the interests of the American people, and especially struggling families and communities currently being left behind. The goal of this tax reform is twofold. First, to channel more of the global economy to the United States. And second, once it’s here, to channel more of its fruits to American workers.

The lesson for populist-minded conservatives is this: globalists may be a problem, but globalization isn’t. Smart, principled-populist tax, trade, and immigration reform can finally put the forces of globalization to work for American workers.

In describing his plan — and you should read the entire essay to learn more about it — the senator highlights similarities to a plan written by economists at the Urban Institute and the American Enterprise Institute (where I am a resident scholar):

A number of economists on the Right and Left recognize the advantages of cutting corporate taxes and raising shareholder taxes. Although there are some important differences, this general approach is similar to a 2014 plan by Eric Toder of the Urban Institute and the American Enterprise Institute’s Alan Viard. Indeed, in a global economy with global investment opportunities, there is no reason for the United States not to tax all income the same.

To read more about Toder and Viard’s ideas, see this op-ed, this Harvard Business Review paper, and their full paper, updated in June 2016.

And be sure to read Senator Lee’s entire essay here.

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