OPINION:
It was reported a few days ago that some folks on Team Trump were considering increasing the top federal tax rate to 39.6%, like it was in the Obama years, from 37%, as set in the Tax Cuts and Jobs Act of 2017.
This sort of thing was predictable. Team Trump has been trying to figure out how to pay for extending the Tax Cuts and Jobs Act and eliminating taxes on tips, overtime, Social Security, first responders, home health care providers, etc. It was just a matter of time before someone floated the idea of tax increases.
That said, it is important to remember that the top 1% of taxpayers pay about half of all federal income taxes. So, maybe they are already paying what the Democrats like to call their “fair share.”
In addition to raising taxes, Peter Navarro, a senior aide to the president (and apparently an econometrician), said tariffs, which are, of course, taxes paid by Americans on the goods they import, would raise $6 trillion over the next 10 years. That’s pretty remarkable, not leastwise because the stated purpose of tariffs is to change consumer behavior. If we could extract $600 billion yearly from American consumers and people who didn’t change what and from whom they bought, the tariffs would fail in their mission.
At $6 trillion, the tariffs would be the largest tax increase in the republic’s history. I’m not sure the president would like that as a legacy.
House Republicans are contemplating spending about $900 billion less than initially planned on Medicaid over the next 10 years. Such an approach would be welcome, but it makes everyone nervous because it is easy to characterize as heartless and mean-spirited, especially if connected to tax reforms, however laudable those reforms might be.
How about all those savings from Elon Musk’s efforts? Well, no one has been able to quantify those savings, assuming they exist. Given that the efforts have been limited to programs and agencies that account for only about 15% of federal spending and that no one seems to be keeping score (a fatal problem come tax reform time), you probably should not expect too much there.
A more direct and politically acceptable approach would be to strike funding for the tax credits embedded in the Inflation Reduction Act. Despite 21 Republicans signing a letter offering support (sort of) for some of the tax credits, every Republican in office during the summer of 2022 voted against the Inflation Reduction Act. They may have forgotten about those votes, but it is unlikely their voters have, and it is an absolute certainty that the president has not forgotten.
Moreover, the cost of the tax credits to taxpayers has increased dramatically during the past three years. At first, they were predicted to cost about $300 billion over 10 years. Now, estimates show they may cost as much as $1.6 trillion. It makes more sense for Team Trump to focus on those tax credits, which generally flow to well-off companies and people, rather than raise rates on hardworking, high-earning taxpayers or impose damaging tariffs that will be paid for by American families and businesses.
On a final note, one of the most durable rules in politics is that people talk about what they care about. So far, Mr. Trump and his administration have talked a lot about tariffs and closing government agencies. That’s their prerogative, but the clock is ticking on tax reform. It is past time for the president to use his considerable leadership skills to accelerate congressional action on tax reform and use his considerable rhetorical skills on things voters care about, such as what they will pay in taxes and whether the economy will prosper or whether they need to prepare for economic doldrums.
• Michael McKenna is a contributing editor at The Washington Times.
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