One of Donald Trump’s campaign promises was to throw out the old tax system and replace it with a simpler system that reduces individual and corporate tax payments. But revamping a tax code that is out of control and totally confusing is not a simple task. The Republican effort to overhaul the tax system has hit a wall in the House of Representatives, and the wall is full of spending cut battles and infighting.
The House Budget Committee is not sending a budget resolution to the floor because conservation Republicans are adding billions of dollars in spending cuts to the basic blueprint of the budget. Trump needs House and Senate approval of a budget, so Republicans can avoid Democratic opposition in the Senate. But the proposed spending cuts on food stamps and Medicaid are not helping matters, and a stalemate could be “the political blue plate special of the day.” A stalemate means no movement on tax reform.
The fly in the political ointment seems to be gaining strength, according to Washington insiders who say “no budget, no tax reform.” The conservation House Freedom Caucus wants to cut $400 billion from programs that help the poor. And the chairman of that committee wants another $295 billion in spending cuts. There is a Republican agreement in place that will top spending levels for defense and nondefense programs, but other spending cuts are necessary so the national deficit doesn’t increase when a new tax system becomes a reality.
But cutting programs for the poor to fund tax breaks for the wealthy and big corporations is not the answer, according to many Democrats. And the initial Trump plan to cut tax rates from seven to three would not help average Americans if some of the itemized deductions go away. And there is talk of a reduction in itemized deductions, especially interest deductions.
There are House and Senate members who want a consumer-driven tax system or a consumption tax. A consumption system would eliminate all the complex paperwork and most of the daily functions of the IRS. But a consumption tax system is not in the cards on Capitol Hill this year. And if the infighting continues in Congress, any new tax system is out of the question. But one way or another Trump will get a new tax code. But just putting any tax code in place may not help solve the long-term tax system debacle.