In Our View: House Tax Bill Flawed

Assertion of Herrera Beutler, others that it will spur economy an absurd fallacy




The tax plan passed last week by House Republicans — including Rep. Jaime Herrera Beutler, R-Battle Ground — is flawed at its very foundation. The proposal, which passed by a vote of 227 to 205, is built upon two rickety suppositions: That there is a need for tax cuts, and that tax cuts will spur the economy. Neither premise passes the smell test, leaving the public with a plan that stinks for average Americans.

With the nation having largely recovered from the devastating Great Recession of the past decade, the argument that tax reform — meaning cuts, in the Republican lexicon — is a specious one. Unemployment is below the level of what is considered “full employment,” the stock market is booming, and economic growth has been steady if not robust.

But the weaker argument — and one that Herrera Beutler disappointingly has echoed — is the notion that tax cuts will spur the economy. The congresswoman has suggested that the reduction in tax revenue to the federal government would be more than offset by an increase in economic activity that would result in increased tax revenue. In other words, the tax cuts would pay for themselves.

For three decades, this has been a Republican mantra, but it represents an absurd fallacy that is easily disproved if not easily done away with.

This conservative dictum was tried at the state level in Kansas beginning in 2012, and the results have been disastrous. Headlines such as “The Great Kansas Tax Cut Experiment Crashes and Burns” and “Kansas Tried a Tax Plan Similar to Trump’s. It Failed” provide some insight. It also was tried in Oklahoma, with the result being “Oklahoma Tried the GOP’s Tax Plan. Now, It’s Electing Democrats.” At the federal level, there were tax cuts in the 1960s, 1980s, and 2000s. In each case, recessions followed about five years later, which might or might not be related, but should be cause for caution.

For decades, Republicans have clung to what they consider to be the success of President Reagan’s tax reform. As Bruce Bartlett recently wrote for The Washington Post, “Tax cuts became the GOP’s go-to solution for nearly every economic problem. … That’s wishful thinking. So is most Republican rhetoric around tax cutting.” Lest one think that Bartlett is a tax-and-spend liberal, in the 1980s he worked for Republican Rep. Jack Kemp and helped author the Reagan tax cuts, admitting, “I had a hand in creating the Republican tax myth.”

Indeed, Republicans are clinging to a myth that bears little relationship with reality. While they are quick to laud the Reagan tax cuts, they are loathe to acknowledge that Reagan then frequently raised taxes — most counts say 11 times — through the closing of loopholes, or that economic growth during the 1980s lagged behind that of the 1970s and 1990s.

Many details of the tax plan that passed the House are deserving of scrutiny. Among them are provisions regarding estate taxes and pass-through companies, which are expected to personally help President Trump — although nobody really knows because he refuses to release his tax returns. There also should be questions about why individual tax cuts will be eliminated after several years while corporate cuts are “permanent.” And for Washingtonians, changes to deductions for state and local taxes could be harmful, as could changes to deductions for health care expenses and interest on student loans.

Those are details near the top of the mountain that is the Republican tax bill. But the larger problem is that the very foundation is cracked, and Rep. Herrera Beutler was negligent to not recognize the flawed premise upon which this plan is built.