Trump and the Flat Tax?

There’s going to be a big tax fight in Washington next year, regardless of who wins the House, the Senate, and/or the presidency. That’s because major portions of Trump’s 2017 Tax Cuts and Jobs Act will expire on December 31, 2025.

Will those tax cuts be extended? Will they be expanded? Will they be curtailed? Politicians will be forced to choose.

In general, I’m rather pessimistic about the outcome for the simple reason that there’s been a huge increase in the burden of government spending.

I wrote about that problem two days ago and highlighted how politicians used the pandemic as an excuse to permanently increase the cost of government.

One result of all that wasteful spending is that we now have enormous deficits. And even though I don’t worry much about red ink (the real problem is spending, not how it’s financed), the practical reality is that it is well nigh impossible to have good tax policy when there is bad spending policy.

But that doesn’t mean we shouldn’t try. In an article for Bloomberg, Stephanie Lai, Amanda L Gordon, and Enda Curran write about the advice Trump is getting on tax policy.

Donald Trump is under pressure from economists in his circle to embrace a flat tax rate… The efforts demonstrate how people around the former president are already lobbying for their preferred economic policies ahead of a potential second term where both taxes and tariffs will be top priorities. …Forbes said…he is advocating for Trump to support a flat 17% tax rate for all income brackets with “generous” exemptions… For a family of four, he said, he would suggest the first $54,000 of income be exempt from federal income tax. …Whoever wins the White House in November will be forced to negotiate a tax deal next year because key portions of Trump’s 2017 tax cuts — including individual rates — expire at the end of 2025. That will set up a complex negotiation — particularly if control of Washington is split between Republicans and Democrats… Trump has not detailed what his tax plan would look like.

I’m glad that people are pushing Trump to be bold on taxes, but that advice needs to be augmented by a big push to make him better on spending.

Alas, that’s one of his worst areas.

Not as bad as he is on trade, but he record on spending is nonetheless mediocre. And that was the case even before the pandemic spending orgy.

The bottom line is that Trump needs to change his mind on entitlements if we want to have any hope of better tax policy. I won’t be holding me breath.

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Image credit: DonkeyHotey | CC BY-SA 2.0.