Imagine you had a time machine and could go back to 1986. Congress was discussing a sweeping bipartisan tax reform plan. Billions in deductions would be eliminated in favor of lower rates. The debate was intense. Fast forward 25 years. Why are House Republicans opposing this?
Corporate tax rates are being cut while special subsidies are being eliminated. Personal tax rates are being lowered somewhere between 6 and 12 percent from current levels. Social Security and Medicare would be shored up through changes in their inflation adjustments. A Republican Senator with strong anti-spending credibility has helped put the proposal together. And a Democratic President has signed on.
This sounds and looks like the tax reform plan President Reagan got through a Democratic House 25 years ago. President Reagan is an icon in the Republican pantheon. House Republicans are now opposing a Reaganesque supply-side initiative. The irony is overwhelming.
Economist Gary Becker outlined the needed components of a solution to our fiscal mess over a year ago: slower entitlement growth; lower tax rates on a broader base; and long-term economic growth, supplemented by regulatory, educational, and immigration reform. What’s needed now isn’t rocket science, but vision and leadership.
“Without a vision the people perish.” And without leadership, nothing gets done.
Douglas R. Tengdin, CFA
Chief Investment Officer
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