In some states there is evidence of Republicans backing down from their promises because they won’t cut government.
In three states, we see the results of Republicans backing down from their core promise of cutting taxes. In Kansas, South Carolina, and Tennessee taxes are going up. And, of course, in Illinois we find Republicans backing down even though people are already fleeing the state taxes.
What is the problem?
The problem is that Republicans are practiced at promising to reduce taxes without promising with equal fervor to reduce spending.
The New York Times reports, “How Low Can Taxes Go? Outside Washington, Republicans Find Limits.”
It ends with this surprisingly accurate appraisal of tax reform at the Federal level.
Many conservatives who support a tax overhaul said they anticipated considerable growth with a reduction in corporate rates, which are among the highest in the world. If those are lowered to 15 percent, down from the current 35 percent, businesses will not only reinvest in the United States but relocate here, they said.
“At 15 percent, Swiss bankers will move here,” said Grover Norquist, president of Americans for Tax Reform.
But restraining federal spending is still going to be a key part of the equation. “What you need is not an explosion of spending,” Mr. Norquist added. “And you need the economy to grow faster than the size of the government.”
In a world in which Mr. Trump’s “deconstruction of the administrative state” reduces the size and cost of the government, the tax cuts make sense. But if lawmakers do not have the nerve to find savings somewhere, like in the social safety net for retirees, the outcome could end up resembling something close to Kansas’ failed experiment.
“The question is whether you can put together some kind of revenue-neutral tax reform,” said N. Gregory Mankiw, a professor of economics at Harvard and chairman of the Council of Economic Advisers under President George W. Bush. “I don’t see the political will to do that right now. Certainly not in this environment.”
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