Congress is on the cusp of passing tax legislation. But prominent voices continue to call for a better approach.
Maya MacGuineas, head of the Campaign to Fix the Debt, wrote in an op-ed that the country needs responsible tax reform.
We need responsible stewardship of the nation’s finances now more than ever. This is not the time to explode the debt and hope that it magically fixes itself.
Not only is the gross debt is now over $20 trillion, but it is on course to grow by some $10 trillion more over the next decade and continue rising thereafter. National debt at such levels poses a serious threat to our economy and way of life. Unpaid for tax cuts will only worsen this already dire state of affairs, with the legislation before Congress potentially adding an additional $2 trillion once you factor in gimmicks that hide its true cost, as well as the added interest payments.
This is unfortunate, for we have a rare opportunity to transform the outmoded and convoluted U.S. tax system to make it simpler and fairer, as well as more efficient and globally competitive. Doing it the right way can unleash economic growth and provide more jobs and a better quality of life for all Americans. But digging the debt hole even deeper will nullify the economic benefits of tax reform, especially in the long term.
That is why a key pillar of tax reform must be that it not add to the national debt. Fortunately, eliminating or limiting the numerous loopholes in the tax code could more than pay for reducing tax rates. Such tax breaks total about $1.6 trillion in 2017 alone. The current tax legislation makes some moves in the right direction by addressing a few of these tax expenditures, but some of the largest ones remain virtually untouched.
Michael Bloomberg, a member of the Fix the Debt Steering Committee, also called for tax reform that does not increase the national debt.
Right now, the corporate code is so convoluted, and rates so high relative to other nations (thereby creating an incentive to keep profits offshore), that the real rates companies pay can be wildly divergent. This is neither fair nor efficient. Eliminating loopholes and reining in the offshoring of profits can and should be done in a revenue-neutral overhaul of the tax code.
Similarly, Fix the Debt made the case for comprehensive tax reform that does not add to the debt.
Tax reform is a worthy goal that should be pursued, but it must be done right. Congress has an opportunity to create a tax system that is much simpler and fairer that can lay the foundation for faster economic growth. Yet, the current approach falls short of the fundamental changes required and will increase the national debt, which will slow growth in the longer run.
In addition, adding the cost of the tax bill to the debt means that we will force our children and grandchildren to pay for our tax cuts. For the sake of our future, Congress must be debating how to fix the debt, not make it worse.
If lawmakers take the time, Congress can achieve tax reform that really transforms the system without adding to the debt. A priority should be to more aggressively tackle waste in the tax code.
Many policymakers have actively exposed waste in government spending. Similar waste exists in the tax code, as there are numerous deductions, exemptions, exclusions, and other tax breaks that came into being much the same way pork barrel spending was created, through special interests with the right connections in Washington.
Tax reform that does not add to the debt will grow the economy faster over the long term than tax cuts that increase the debt. In fact, tax cuts could actually have a negative impact on growth over time if they increase the debt.
There is still time to get tax reform right. Congress needs to listen to these voices.
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