A group of President Trump’s former advisers are publicly calling on him to scrap his approach to reforming the tax system.
In a column in the New York Times Wednesday, four former advisers to Trump’s campaign — economist Art Laffer, conservative commentators Larry Kudlow and Stephen Moore and Steve Forbes, the wealthy editor-in-chief of Forbes magazine — warn that Trump’s current strategy risks failing one of the chief goals of his new administration.
Moore and the other advisers call on the president to give up on a grand, ambitious overhaul of the tax system. They write that the president should concentrate on the more manageable task of giving corporations a tax cut.
Because of the Senate’s rules, a cut would probably have to be temporary, so Trump and Ryan might have to abandon any hope of establishing a lasting legacy on taxes.
On its own — without reductions in federal outlays or increases in other taxes — a tax cut for business would imply that the federal government would have to borrow more money to make up for the foregone revenue. A permanent increase in borrowing would expose the plan to a Democratic filibuster.
Moore argues even temporary relief would be better than nothing at all. Ryan "doesn’t want to take the field goal here," Moore said. "We’re saying, ‘Put points up on the board.’ "
The four men are influential proponents of orthodox GOP thinking on the economy. Yet their appeal to the public is acknowledgment that their influence over their old boss and over Republicans in Washington generally may have waned as the party searches for new ideas on taxes.
"We’ve made this case to the White House personally as well," Moore said in an interview. "Part of it is because the White House hasn’t been very receptive to this idea … This is to get their attention."
Moore said that the White House had not provided a clear agenda for tax system, and that a plan laid out by Rep. Paul Ryan (R-Wis.), the speaker of the House, and his GOP colleagues was unlikely to pass. Instead, Moore said Trump should take "a total different tack."
The former advisers also argue Trump should reject a proposal from Ryan and his allies to change how imports and exports are taxed. On paper, the change would impose a new tax on imports, yielding an estimated $1.2 trillion in new revenue over a decade that Republicans could use to make up for tax relief for businesses and households and ease passage of a permanent bill.
The idea is a controversial one, though. Retailers and other major importers argue that the new tax would increase prices for ordinary American consumers. Moore’s group argues the extra revenues are not worth it, especially if Republicans are willing to accept a bill that would increase federal borrowing.
Reforming the system for individual taxpayers can wait, according to the four former advisers. Their column argues that relief for businesses would stimulate investment and hiring, with benefits for workers throughout the economy — not just wealthy households that own stock in major corporations.
"It’s not just Trump," Moore said. "The economy needs a pick me up."
That kind of argument, long widely accepted by conservative policymakers, had begun to lose favor even before Trump was elected. Soon after President Reagan’s inauguration, he signed legislation granting the wealthy generous tax relief on the promise that the gains would trickle down to ordinary people. President George W. Bush did the same.
In short, a simple, generous tax cut like the one Trump’s former advisers are calling for is routine Republican policy. More recently, though, conservative thinkers have begun to argue for thinking differently about taxation.
However successful Reagan’s plan might have been in stimulating the economy, these conservative reformers say, rates are much lower than they were when Reagan took office. Simply cutting taxes even further might not be enough for the economy.
Jared Bernstein, who served as chief economist to Vice President Joseph R. Biden Jr., said that fiscally conservative lawmakers might be more wary now of reducing taxes and increasing borrowing. If cuts fail to deliver economic stimulus, then the government will be left deeper in the red.
"The argument that these sorts of tax cuts will pay for themselves is, thankfully, less broadly accepted," Bernstein said. All the same, he added, there is a good chance that Republicans will ultimately opt for the straightforward approach advocated by Forbes, Kudlow, Laffer and Moore, increasing the deficit.
"These authors have long argued a very simple case," Bernstein said. "In that sense, Forbes et al. may find that they’ve once again prevailed."
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