Brian Darling: Rand Paul’s Fight for Tax Cuts

Ryan Ellis wrote a piece in Forbes that exhibits a complete misunderstanding of my former boss, Senator Rand Paul’s (R-KY), position on the Trump tax plan. 

Sen. Paul has been a consistent opponent of the idea of “revenue neutral” tax reform and a proponent of tax cuts that will expand economic growth.  I can’t tell you the number of times I listened to my former boss discuss the idea that “revenue neutral” leads to results that some taxpayers pay more and some pay less.  In other words, some get a tax cut and others get a tax hike.  That is an idea that will not spur economic growth.

I know Ryan Ellis and know him to be an expert in tax policy, yet he mischaracterizes the Paul position on the Trump plan. 

Ellis argues the following:

The GOP Framework doesn’t say when the 12 percent bracket ends. The 12 percent bracket is the first bracket, for sure. But it’s up to the tax writing committees and the Congress to decide how far up the income scale the 12 percent bracket goes. Senator Paul is assuming it will stop at a certain point, and that taxpayers earning income above that point will be squeezed. He can’t know when the 12 percent bracket will stop, because no one does–it’s not in the Framework.

It is perfectly reasonable for Sen. Paul to argue this point, because, as Ellis admits, nobody knows where the Congressional tax writers will end the 12% tax bracket.  The fact of the matter is that nothing prevents the GOP framework from being more specific now. Sen. Paul is playing his role as a legislator to push hard to make sure that taxes are not hiked on any American in a final draft of a bill.

Ellis makes a second point:

The GOP Framework doesn’t say how much it will grow the child tax credit, or where it will phase out. Under current law, the child tax credit is $1000 and begins to phase out at $110,000 of adjusted gross income for a married couple. The Framework calls for both of these numbers to rise, but it leaves how high to the tax writing committees and the Congress. Senator Paul cannot possibly know if middle class families with kids are getting squeezed if he doesn’t know how big the child tax credit will be, nor to whom it will be available.

Again, it is reasonable for Sen. Paul to have a say and to argue that the tax writing committees have the authority to set the rates in a way that will hurt the middle class.  It is a favorite argument of the establishment to argue that it is premature to make an argument until the Congress finishes drafting up a bill.  At that point it is too late to impact the debate. A smart legislator would, like Sen. Paul, make the case early so that the tax writing committees don’t make bad decisions.

And Ellis’s final point is to criticize Sen. Paul for using the liberal Tax Policy Center as authority for his arguments:

Senator Paul is getting his assumptions not from the GOP Framework, but from the ultra-liberal “Tax Policy Center,” whose job it is to tear Republican tax plans to shreds. Senator Paul is assuming that the 12 percent bracket depth, the size of the child tax credit, and the phaseout of the child tax credit are exactly as described in the Tax Policy Center’s controversial “study” of the GOP Framework which has come out in recent days.

On this point, Ellis’s point is accurate that Sen. Paul is using a left wing think tank to argue his case, yet the Tax Policy Center study has been the centerpiece of the current debate.  Would be better to use an analysis from center-right groups like The Heritage Foundation, Americans for Tax Reform, or the Tax Foundation as authority, but the Tax Policy Center is the centerpiece of the national debate right now.  When you read the Tax Foundation and Wall Street Journal analysis, they admit that the plan as currently marketed hits middle income Americans with an increase in taxes. The fear of many conservatives and libertarians is that the tax writers will try to make up lost revenue on the backs of the middle class.

As Sen. Paul argued right here in Breitbart:

Somewhere in the authors’ efforts to cut taxes for our highest and lowest earners, the middle class was seemingly left to bear the burden. The problem is, after lowering those rates, they decided the rest of the plan should be “revenue neutral.” 

And that is the centerpiece of the problem.  Yes, the corporate income tax is going to be cut in a final plan, yet now there are discussions about it not settling at 20% and the corporate tax rate may creep up to lower the “cost.”  The highest and low-end earners also get a cut in the draft plan, yet the bean counters on Capitol Hill seem to want the plan to resemble a “revenue neutral” tax reform plan – not a tax cut plan.

As to why Sen. Paul is speaking up now when the debate is only about an outline:

Now, as they have noted, and I fully admit – the plan is not final. There are question marks, and the plan could change. But that’s exactly why I am speaking up now. I don’t want to vote for a plan that cuts some taxes but raises them on others, especially not on the middle class. So I want everyone to see the errors in their plan, look for solutions, and come together for a plan that can pass. I’m not looking to dictate the details, nor am I set that the plan has to have a definite amount of tax cuts – it just should not be a tax HIKE on anyone. 

Senator Rand Paul is trying to avoid the same game plan that sabotaged the push to “repeal and replace” Obamacare. The leadership in Congress allowed the committee process to draft up a bill that could not pass the Senate.  Same thing likely will happen with tax reform as this outline is converted from a tax cut to a “revenue neutral” mess. It would make far more sense for a bill to be drafted up that is a tax cut for all Americans and rolled out on the floor of the House and Senate without the committee process loading the bill up with special interest carve outs and a watering down of the tax cuts. 

That being said, it is important for Members of Congress who are not on tax writing committees to speak up now before they have a “take-it-or-leave” it proposition including tax hikes on some Americans.  Better to make the case today to avoid the favorite talking point of the leadership – “Don’t let the perfect be the enemy of the good.”  This plan may not even end up “good” if revenue neutrality becomes more important than tax cuts.