Editor’s note: This is the second of a three-part series on impending tax reform featuring an exclusive interview on Liberty Nation Radio with Stephen Moore, famed free-market economist and key advisor to Donald Trump during the 2016 presidential campaign. In the first part, Moore discussed the efficacy of corporate and individual rate reductions. In this segment, he takes up the question of whether the tax cuts will lead to higher deficits, and how the plan gets rid of corporate loopholes.
Senate Republicans on Thursday unveiled their own version of tax reform, proposing to, among other things, delay for one year the sizable corporate tax cut – from 35% to 20% – which was a centerpiece of the House plan released last week. The GOP, which has yet to deliver on any of the legislative agenda they campaigned on in 2016, surely recognizes that their ability to reconcile differences between the House and Senate and pass into law this first sweeping tax reform in three decades may well determine whether they maintain control of one or both chambers of Congress in next year’s midterm elections.
One of the pressing issues concerning these tax cuts is whether they will blow up already substantial federal deficits and add to a national debt which exceeds $20 trillion – and grows by billions of dollars every single day. In an exclusive interview on Liberty Nation Radio, Stephen Moore, famed economist and founder of the Club for Growth, pointed to the results of previous tax cuts:
Tim Donner: Stephen, it seems the biggest problem we always face when lowering taxes is that it has to be revenue-neutral. We have to promise that it won’t increase deficits and, yet, the establishment forces in Washington always rely on static calculations, which only count lost revenue from taxes and don’t take into account the jobs and the resulting tax revenues generated by higher growth because of lower taxes. They do that instead of dynamic calculations, which do take into account reasonable assumptions on economic growth. How can we make it easier for the average American to understand and embrace free-market supply-side economics?
Stephen Moore: Well, I think by giving people a history lesson. Look at what happened in 1960s when John F. Kennedy cut tax rates. Look what happened in the 1980s when Ronald Reagan cut tax rates. Both of those were two of the great boom periods in American history. People forgot that even Bill Clinton, although he raised income taxes in his second term, actually cut the capital gains tax, one of the biggest capital gains tax cuts in American history, and we got booming revenues as a result of that. We saw rising incomes. We saw huge increases in jobs. Cutting taxes is good for the economy.
By the way, the average American understands that. I saw a poll just the other day, Tim, that asked, “Do you think that this tax cut will be good for the economy?” Sixty percent said yes and thirty percent said no. By a two to one margin, I think Americans instinctively understand when you give workers and businesses a tax cut, the country’s economy does better, and that’s not complicated.
Tim Donner: Well, referring back to what I said about how most Americans are opposed to a corporate tax cut, a lot of it in these polls, Stephen, is how they ask the question.
Stephen Moore: Of course.
Tim Donner: If they ask the question, “Are you in favor of tax cuts for big multinational corporations,” how many people are going to answer, “Yes?”
Stephen Moore: That’s so true, but the thing is that with these corporations, a lot of them actually pay less than 20%. Most Americans think that the corporate, that this tax system is totally rigged to the big corporations, and there’s a lot of truth to that actually. There’s all these loopholes in the tax system. When I was looking at some of the tax deductions that this tax bill gets rid of. It cleans out a lot of the stables of the tax system. Did you know that these companies can get tax breaks for building sports stadiums, like football and baseball stadiums? That’s crazy. Then the government is giving help for the wind and solar industries. Not only do they not pay any taxes, they have a negative tax because we pay them. We actually pay them a negative tax.
What we want to do is actually level the playing field so that … A rate goes from 35 to 20%, but every company is going to pay that 20%. We’re going to get rid of the ways you can shelter your money from the tax collector, and that’s fair. By the way, I think this is going to get done.
In the final part of this series tomorrow, Stephen Moore discusses whether this tax reform plan is likely to spur much-needed economic growth.