Tuesday, May 30, 2017

Permanent Tax Cuts Are An Illusion

The House Ways and Means Committee is holding hearings in the course of preparing to mark up a tax cut/tax reform bill.

There are several schools of thought on how to proceed.  The biggest division is between those who want bold, pro-growth cuts in business and personal tax rates without regard for deficits and those who want smaller cuts that will achieve budgetary balance after 10 years. If the 10-year cycle is in deficit after a decade, the tax cuts will expire. The alleged benefit of the ten-year balance rule is that the tax cuts will not expire (sunset) and thus will be permanent (under Congressional rules). The second group points to the example of the expiration of the 2001 Bush tax cuts in 2011 (extended for two years until 2013 by President Obama).

This argument is a will-o'-the-wisp.  The Congress can legislate changes in tax rates any time it can muster the votes.  To be clear, THERE IS NO SUCH THING AS PERMANENT TAX CUTS. Changes in tax rates have been a regular feature since the adoption of the (16th) Income Tax Amendment in 2013.

Your friendly proprietor is wondering whether the goal of "permanence" is just a ruse to block massive tax-rate cuts in order to block President Trump's agenda?