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How to Make the Left Embrace Trump’s 15% Corporate Tax Rate Target

The opinions expressed by columnists are their own and do not necessarily represent the views of

In Washington, it’s time for congressional Republicans to do the limbo.

Most conservatives agree that America’s out-of-control corporate tax rate needs drastic reform. Over the next few weeks, Speaker Paul Ryan and Ways and Means Committee Chair Kevin Brady must crank up the boombox and ask their GOP colleagues just how low they can go.

America’s federal corporate tax rate is currently sitting at 35 percent – the highest in the developed world – so it’s no wonder why the U.S. labor force participation rate has been unable to bounce back to pre-Great Recession form. In fact, today it is still sitting at just 63.1 percent, 3 points below its 2008 mark. Corporate tax cuts are just as crucial to restoring working class jobs and purchasing power as bottom rate income tax cuts are. The time to act is today, and there are no do-overs: conservatives must fix it now while the GOP still controls every facet of Washington politics.

So, just how low are Ryan and Brady prepared to go? The rough draft of the 2017 tax reform blueprint, released last month, set the number at 20 percent -- a respectable figure, but perhaps one that is not quite bold enough. Now is not the time for half measures. Pull the Band-Aid off fast.

President Trump’s message to Speaker Ryan: How low can you go?!

Shortly after the blueprint’s release, Trump announced that “we’ll be adjusting [the plan] a little bit over the next few weeks to make it even stronger.” Even though talks of negotiations on the corporate tax rate have quieted, behind the scenes I’m sure the discussion is raging given Trump said, “We’ll see what happens, but I hope [the corporate tax rate is] going to be 15 percent.”

Never Trump pundits are making the rounds on cable shows, such as MSNBC analyst and Republican consultant Elise Jordan, who equated the president’s corporate tax rate goal to a grown adult asking for a unicorn. If they know anything about Trump after these few months…get ready to see a unicorn.

Regardless of what they say, though, Trump’s plan is entirely feasible. How? By getting rid of anti- “America First” deductions. Not only will it make the tax code more conservative, but also – ironically – more favorable among liberals and Neo-Republicans.

Let me be clear: given the current state of the 4,000-plus page tax code, I don’t have any problem with itemized deductions, but the truth is each one only benefits small segments of the population. In our current state, the deductions are our only defense against the violence of taxation. Republicans’ end game should always be to trade them for flatter, fairer corporate and income tax rates that help everyone across the board.

I’m not saying that Republicans should attempt the impossible and rid the 4,000-page tax code of every itemized deduction – that would really be like asking for a pony. However, they should undoubtedly trade in some for a lower rate, especially those that populists on both sides of the aisle have been railing against for years.

For instance, there is currently a tax break on the books that allows foreign insurance companies to utilize “affiliate reinsurance,” giving them a competitive advantage over their U.S.-based counterparts by offshoring their profits made in the United States to no-tax countries. This huge economic incentive causes American firms to relocate or get absorbed by a competitor residing abroad, leading to the artificial destruction of many American jobs. The Joint Tax Committee staff estimated that removing the offshore insurance deduction would raise $8.9 billion over 10 years – a pay-for that will bring Congress one step closer to Trump’s goal of a 15% corporate tax rate. Removing this and similar deductions, mixed with some bipartisan spending cuts to government waste, will get them all the way there.

The reason the GOP should legislate this way is not because one Townhall columnist says so, but because the majority of Washington agrees – especially on this offshore insurance deduction, which many on the left have been railing against for years. In fact, last year, Sens. Mark R-Warner (D-VA) and Rep. Richard Neal (D-MA), introduced a bill to scrap this very provision from the tax code, which Sen. Warner said was done to “put all insurers on a level playing field.” Years earlier, Sen. Bob Menendez (D-NJ) sponsored a similar bill as well.

The margins for passing tax reform are going to be extremely slim. Unless some Democrats come on board, only two Republican senators can dissent. This means that Democrat support will be needed, because it will be impossible to strike a deal that pleases both the Mike Lee/Rand Paul and Bob Corker/John McCains of the GOP camp.

I would prefer there to be no federal income tax at all. But just as most conservatives and libertarians favored the pre-1913 federal tax set-up, which consisted of no income tax and more tariffs – an imperfect flat tax of sorts -- to the present, so too do I favor lower rates for fewer deductions.

Republicans and Democrats have not agreed on tax rate cuts in over two decades. Unless “compromise” is indeed a dirty word in a Trump-dominated Washington, Paul Ryan and Kevin Brady should pounce on this opportunity and explore closing more deductions like this one while they still can. 

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