Perrin: President Trump’s ‘America First’ Tax Reform

Now that President Trump has submitted his plan to Congress to reform our tax system, Congress needs to act and be bold.

The plan would consolidate the current seven tax brackets into three, double the standard deduction, lower the corporate income tax and allow people to file taxes on a postcard if they choose.

Congress needs to pass an “America First” tax reform plan that mirrors the President’s plan. The plan should both cut taxes for Americans who are struggling, simplify the tax code and convert the corporate tax system to one that rewards patriotic companies that hire Americans and sell to Americans.

Right now, Congress is a mess. The Republican health care plan is in disarray, Trump’s transportation plan is still in an embryonic state and tax reform is being slow-walked. The same establishment politicians who have thwarted tax reform since the days of Reagan are tasked to pass Trump’s tax reform plan.

Congress should make the process of paying taxes very easy. First, Congress needs to run away from the idea of “revenue neutral” tax reform. Revenue neutral means that one grouping of Americans pays more and another pays less.  Rearranging the deck chairs on the Titanic is not going to make our tax system better and it will not be received as reform. Americans want tax cuts. Trump’s current plan would be a massive tax cut and possibly the largest in U.S. history.

Americans would be very happy for tax simplification that allows them to file taxes using a post card. This was a promise of Speaker of the House Paul Ryan’s “Better Way” plan and Congress needs to keep that promise. The plan calls for “simplicity” that would allow most Americans to file taxes on a card the size of a postcard. Reforms that simplify while expanding jobs would be one major reform that would give Americans hope that the government can produce one good piece of legislation during these turbulent times.

Another excellent tax reform idea proposed by Rep. Kevin Brady (R-TX), Chairman of the House Ways and Means Committee, is converting our tax system into a territorial system that stops rewarding companies that relocate overseas and downsize their U.S.-based operations.

One way to do that is to impose a Border Adjustment Tax (BAT) while imposing the “lowest taxes in modern history on local businesses – small or large, corporations or family-owned.” This is a bold idea to scrap the old system that has allowed American corporations to be taxed at the highest rate on the globe sending American companies overseas.

A BAT is a key to reducing the corporate income tax and other burdensome taxes on the American economy.

American for Tax Reform (ATR) is a supporter. They describe the BAT as follows:

Under the border adjustability system, the costs associated with products exported from the US are fully deductible from the cash-flow tax, and the costs associated with products imported into the US are not deductible from the cash-flow tax.

A BAT would create a level playing field with foreign competition and would restore sanity to the tax code. Right now, when an American business sells to another nation, they are not treated the same as foreign companies are treated in the U.S.

The BAT will help level the playing field for American companies who are competing against foreign companies who have a far more favorable environment for them to sell their goods and services in the U.S., versus the disadvantageous climate American companies face abroad.

Many conservatives worry about imposing any new tax. They are spot on and I would not want to see any new tax until you eliminate or greatly reduce the old tax.

Just like Trump’s announcement that if you want any new regulation, two existing regulations must be eliminated.   Creating the BAT should be handled the same way.

Ultimately, President Trump and Congress will be punished if one of two things happen this year. If Congress fails to pass tax reform, that will be a black eye on both the executive and legislative branches of the federal government. If Congress passes tax reform that does not lower taxes on average Americans, simplify the filing of taxes, and convert our corporate system into a territorial “America First” system, then tax reform will be a wasted effort.

Serious promises were made to the American people and serious results must follow, and President Trump is the change-agent who can get it done.

Dan Perrin is a political strategist.