It seems that for the past several years policy discussions have been dominated by the need for “comprehensive tax reform,” “comprehensive immigration reform,” “comprehensive health care reform,” “comprehensive entitlement reform” and the like. This makes sense, because in so many areas we are burdened with a thicket of failed, outdated policies that are many decades old and no longer appropriate for today’s economy and U.S. population.
So comprehensive reform is needed.
Meanwhile, and unfortunately, Congress can’t seem to execute its most basic function: Pass 12 legally required appropriations bills before October 1. Not a single appropriations bill has been enacted on time since 2009. And the last time all 12 “approps” were enacted on time was 1996. If, over the course of a legislative year, Congress can’t even perform its most basic duty, it seems unlikely it can take on additional, comprehensive reforms.
The American people are growing increasingly cynical about politicians who promise comprehensive reforms over repeated election cycles, and then deliver nothing. Imagine the reaction of Trump voters if it becomes clear that there is going to be no significant immigration, tax or health care reform. Torches and pitchforks?
As much as we policy nerds like to design comprehensive reforms and see them implemented, it’s time for Congress and the White House to do something.
That means, on tax reform, focusing on the most important elements that would contribute to jump-starting economic growth. Three basic elements would do the trick:
We’ve long believed that nothing encourages businesses to invest like immediate business expensing, instead of depreciation. And Kyle Pomerleau of the Tax Foundation has a piece today arguing that full expensing is even more important than a business rate cut.
Speaking of which, cutting the corporate income tax rate from the current, uncompetitive rate of 35 percent to something under 25 percent would make a significant improvement in U.S. global competitiveness. Even better, phase it down to something under 20 percent, a percentage point per year.
Finally, fixing our dysfunctional international tax regime and encouraging the repatriation of trillions of dollars in capital stranded overseas would bring home welcome new investment capital, as well as new federal revenue.
Encouraging faster economic growth should be the priority, and we can’t afford to lose that opportunity because it’s difficult to accomplish comprehensive tax reform. It seems the Navy’s KISS principle—“Keep it simple, stupid”—should apply to policy as well as to engineering.