The mad dash is on in Washington to enact a tax bill, and at the same time to pass a funding bill to keep the U.S. government open and functioning into the new year. How did we come to such a scrambled situation, in which these major issues are backed up against the clock ticking down toward 2018? As the saying goes, timing is everything.
An incoming presidential administration’s time is precious. And it’s most valuable at the beginning of the new president’s term, when he has the nation’s undivided attention and Congress is most attuned to following his lead. But that opportunity was squandered by the Trump team and Congress when they didn’t get their priorities straight at the beginning of 2017. They’re like a bunch of frat house fellows who put off study until the very last minute, and are now cramming for exams and sweating to throw term papers together.
This happened because of the failure to recognize that the first priority of the Trump administration should have been addressing the basic economic issues that affect everyone, from corporate executives to working people. Donald Trump won states like Pennsylvania, Ohio, Michigan and Wisconsin, and was swept into office on a wave of deep concern about the nation’s economic course in those and other states, where hard-pressed middle-class voters feel the most stress of uncertain economic times. The clearest mandate from the American electorate was to simply get our nation’s economy moving.
2017 should have begun with a concerted push to put tax reform and economic development at the top of Washington’s agenda. That would have given Congress time to fully consider the implications of the taxing and spending decisions it is now making in the rush to adjourn. Nearly a full year has been lost, in which tax reform and infrastructure initiatives could have taken hold earlier on and provided businesses with more direction and boosted job growth.
Instead, Congress wasted time flailing around to “repeal and replace” Obamacare — which was not a priority of American voters — and is now patching together a tax bill that could actually create a serious drag on the nation’s economy. In the ill-considered move to strip out tax deductions for state and local taxes and home mortgage interest, one-sixth of our economy may be put at risk. Home prices may tumble, new construction could stall and jobs could be lost. The 2007-09 recession — which was precipitated by a housing finance crisis — was bad, but the next one could be worse.
There’s still time, even at this late hour, for Trump and Congress to get back to keeping his promise to jump-start economic growth. While a cut in the now 35 percent corporate tax rate, which would bring the U.S. into line with other developed nations, should remain a centerpiece of tax reform, the rate could easily be cut to 22 to 25 percent, rather than the currently proposed 20 percent, as Trump himself has recently suggested. That adjustment would produce several hundred billion dollars in revenue, and still help bring back trillions of corporate tax dollars currently stashed overseas.
Keeping some form of the alternative minimum tax and reducing, rather than eliminating, the estate tax would generate additional dollars. And closing the infamous “carried interest” tax dodge would bring in billions from hedge fund managers who currently pay a lower tax on income than average taxpayers.
With those revenues, Congress could keep the full deduction for state and local taxes and home mortgage interest, lower income tax rates and help fund Trump’s infrastructure-building pledge. That would make 2018 a year that gets off to the right start, and make up for the laggard pace of 2017 in the nation’s capital. It would be a holiday present for the entire country.
Al D’Amato, a former U.S. senator from New York, is the founder of Park Strategies LLC, a public policy and business development firm. Comments about this column? ADAmato@liherald.com.