Republicans Need to Make Tax Bill More Pro-Growth

The House Republican tax bill has been marketed as pro-taxpayer and pro-growth, yet there are number of provisions in the bill that sound more like class warfare than pro-free market reforms.

The Club for Growth has raised the alarm that the Republican crafted Tax Cuts and Jobs Act contains provisions that sound like something that could have been written up by Sen. Bernie Sanders (I-Vt.). This is a good bill, yet it could be so much better if Republicans stopped trying to please liberal Democrats. It is clear that not one Democrat in the House or Senate is going to vote for this bill, therefore it defies logic that liberal Democratic tax provisions that target job creators have been added to a Republican-crafted tax reform bill.

The Hill reported on Nov. 7 that the Club for Growth declared that this bill has failed “the pro-growth test” and the bill violates years of campaign promises made by Republicans. The president of the organization, David McIntosh, told The Hill, “While the corporate tax cut will lead to some increase in our nation’s GDP, the rest of the provisions on individual taxpayers fails the pro-growth test.” The Club for Growth points to a series of shortcomings in the House bill that need to be fixed before this bill can become pro-growth.

The Club for Growth points to a provision creating a fourth income tax bracket that clearly punishes job creators. “Tax the rich” and redistribution of wealth is the talk of socialists, not Republicans. Creating this higher tax bracket that punishes success will not raise much money, and it gets the country away from the idea of a flat tax that taxes all Americans at the same fair rate.

A provision that got the attention of the National Federation of Independent Business was one that hiked taxes on certain small businesses termed “pass through” entities. Small business is an engine of the economy and any tax hike on the small business will lead to the opposite of economic growth. Again, this is a provision that could have been written by a progressive Obama supporter, yet not expected to be a product of a Republican tax plan.

The fact that Congress has not immediately and fully repealed the death tax, also known as the estate tax, that punishes death with massive taxes on property, is also a head scratcher. It is great that taxes are being reduced that confiscate property after death, yet Congress just can’t seem to pull the trigger and just repeal this awful tax provision 100 percent.

Another class warfare provision is Section 3801 of the bill that punishes nonqualifed deferred compensation plans. Those plans help companies retain good talent and incentivize entrepreneurs to stay with a company for a longer period of time. That provision would impose taxes on these deferred compensation plans when they “vest,” not when they pay out. In other words, the taxes would be immediate, but the compensation would be deferred. I know that makes no sense, yet this is a way for Congress to attack job creators in a way that gives them a liberal talking point when attacked by liberal reporters.

Republicans have promised for years that they would put out a tax reform bill that would grow the economy. Speaker of the House Paul Ryan (R-Wis.) gave a speech at the National Association of Manufacturers on June 20 where he promised: “We are going to cut taxes. But if we are going to truly fix our tax code, we have to fix all of it — both for individuals and businesses. Why? Because this will create jobs. That is what this is all about: jobs, jobs, jobs. Good, high-paying jobs.” Then why punish the job creators and why add in these anti-growth provisions that will water down the impact of the Trump tax cuts.

This plan is in the early stages and the Senate is expected to push a bill that is different from the House measure. One concern is that the Senate may go even further to the left in a way that waters down the pro-growth aspects of the tax plan. Let’s hope that the Club for Growth’s early warning is listened to by Republicans in Congress so this tax plan can get back to Ryan’s promise of “job, jobs, jobs. Good, high-paying jobs.”

If Republicans in Congress water this bill down, they are missing the golden opportunity of a lifetime!

Steve Sherman — an author, radio commentator and former Iowa House candidate — is a consultant for the D.C. public relations firm Liberty Government Affairs.

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