Senator Bob Corker, R-Tenn., is right: Any tax reform package that adds to the deficit shouldn’t become law.
Addressing the issue in a committee hearing last week, Corker said:
Unless it reduces deficits – let me say that one more time – unless it reduces deficits and does not add to deficits with reasonable and responsible growth models, and unless we can make it permanent, I don‘t have any interest in it. I think the greatest threat to our nation is our fiscal issues. It’s not North Korea. It‘s not ISIS. It‘s ourselves. It‘s our inability to deal with this longer-term issue, and every year that goes by it gets worse.
As I’ve noted, the unsustainable national deficit and debt drive up interest rates and reduce access to opportunity, drain the nation’s investment and productivity potential, and reduce America’s appeal to external investors.
Unfortunately, Corker is increasingly lonely in his views. Speaking to NPR, the senator lamented that so few Republicans share his concern. “Especially after Election Day, I’ve just seen it’s like party time up here. Nobody cares about deficits anymore.”
But let’s be clear, the issue here isn’t the present tax reform outline that GOP leaders have presented. Indeed, the outline of that reform; of income and corporate rate reductions and code simplifications, and the elimination of loopholes and deductions, is positive.
Instead, the problem is that as Congress approaches a vote on the final legislative package, GOP leaders will come under pressure to scale back the elimination of deductions and loopholes in return for votes on rate reductions. We’re already seeing this in the form of northeastern Republicans who want to prevent the elimination of the state and local tax deduction.
As this pressure grows, Republican leaders are now claiming that tax reform deficits can be offset with super-high economic growth rates. The White House is happy with this approach. In May, White House budget director, Mick Mulvaney, told the Washington Examiner that tax reform needn’t necessarily be deficit neutral.
Mulvaney knows that unless we hammer deductions and loopholes, it will be impossible to get deficit-neutral tax reform. But Mulvaney works for Trump, and Trump wants a legislative victory at all costs.
There is a way to address Corker’s concerns and also win bigger rate reductions and deduction eliminations, and that’s by introducing a national sales tax to offset their revenue. The problem is that even if it comes with offset tax cuts elsewhere, the idea of a “new tax” is toxic in today’s populist GOP.
Regardless, Corker deserves credit. At least one Republican in Congress is committed to putting math, honest economics, and the nation’s long-term interests first.
