Dysfunction, Divided Party Accomplishes Something Anyway

We didn’t think congressional Republicans could pass a major tax bill without creating something worse than the status quo. The party’s ideological confusion and fractiousness, its thin majority in the Senate, the president’s penchant for distracting tweets: We assumed the worst. And yet the tax bill passed today by Congress, despite all the apocalyptic and dishonest rhetoric from the Democrats and their allies in the media—and indeed some unsavory provisions in the legislation itself—is a good one. It’s moderately unpopular according to some national polls, and Democrats can be counted on to spend 2018 accusing Republicans of helping the rich on the backs on the poor. But the bill’s reforms can be easily defended by any free-market conservative.

The bill lowers the cost of running a business in America. It cuts the corporate tax rate to 21 percent from 35 percent, reduces taxes on business-owners who pay individual rather than corporate rates, and makes it easier to deduct business investments. If you think of taking less money from taxpayers as “costing” the federal government, these measures will “cost” rather a lot. But the American economy has had lackluster growth for a decade, and there is no hope of dealing with the deficit without much more robust growth.

The bill further deletes an array of deductions that, however valuable to some individuals and interest groups, should never have been in the tax code in the first place. By far the most important of these is the deduction of state and local tax payments. The bill caps this deduction at $10,000. Almost all of the Republicans who voted against the bill were from the European-style welfare states of New Jersey, New York, and California.

That’s understandable—wealthier residents of those states may pay higher individual rates as a result of the bill—but their objection wasn’t strong enough to sink the entire reform. Republicans from these states who voted “aye” deserve enormous credit for choosing a principled reform over political convenience and braving the fury of the media: New Jersey’s Tom Macarthur; New York’s Claudia Tenney, Tom Reed, John Katko, and Chris Collins; and California’s Tom McClintock, Paul Cook, Jeff Denham, David Valadao, Devin Nunes, Kevin McCarthy, Steve Knight, Ed Royce, Ken Calvert, Mimi Walters, and Duncan Hunter.

Democrats are certain to make the tax bill a major issue of the 2018 midterms. Republicans are betting that the bill will encourage the kind resilient growth this country hasn’t seen in a long time, but no one thinks we’ll see the results of that growth in 2018 or even 2020. That could mean tough times are ahead for the GOP—but only if they decide not to defend a worthy accomplishment on grounds of fairness and sound economic principle.