Key tax policies emanating from the east and west coasts are like passenger trains passing one another heading in opposite directions. One train is loaded with elected officials proposing changes to reduce taxes while the other is packed with those pushing for new and higher taxes.
The cumulative effect of those modifications will impact all of us and our economy, jobs and ability to compete as a state and nation. The adjustments will determine whether we grow, limp along or wither away. Make no mistake, they will impact our pocketbooks and family budgets.
On the Washington, D.C. train being driven by President Donald Trump and Republicans who control Congress, reform means lowering rates for business from 35 percent, eliminating special interest loopholes, and making our laws and Internal Revenue Service codes more transparent and fair.
They are betting that cutting taxes will entice more companies to reinvest in America and believe their approach will be equitable for middle-income taxpayers. The billions in new investments will create more jobs for our unemployed and under employed.
It will mean that more people will be paying taxes and contribute more tax revenue to fill our government coffers.
To make up any revenue loss and not acerbate our growing national debt—now approaching $21.2 trillion—Congress will be looking to close special interest loopholes in a tax code which has largely been untouched in 30 years.
The President believes voters are siding with him. “Americans are rightfully frustrated with the complexity of the 74,608-page-long federal tax code,” as the Washington Times reported last year. “The federal tax code is 187 times longer than it was a century ago, according to Wolters Kluwer, CCH, which has analyzed it since 1913.”
On the tax increase track is Washington Gov. Jay Inslee and Democrats who plan to impose new carbon and capital gains taxes and close loopholes. Inslee is hopeful that Manka Dhingra wins the 45th District Senate seat (east King County) thus solidifying Democrat’s control of the state legislature. A Dhingra victory increases chances the Governor will get the $5.5 billion in new taxes he proposed late last year.
Seattle city leaders are driving a new income tax. In July, its city council slapped a 2.25 percent income tax on people earning over $250,000 a year and families surpassing $500,000. That ordinance is being challenged in court.
Seattle proponents’ philosophy is “Tax the Rich, House the Homeless” as many demonstrator’s picket signs read.
National Review writer Philip Devoe recently remarked about Seattle: “The new income tax would threaten not just the low earners supposedly unaffected by it, but the city and state’s booming economy as a whole.”
The Peter Peterson Foundation, which is focuses on putting our nation on a more sustainable long-term fiscal path, says time is running out for federal tax reform. The longer elected officials push it under the carpet, the larger the problem becomes.
According to Peterson: “The non-partisan Congressional Budget Office (CBO) projects that national debt could rise to as much as 175 percent of gross domestic product (GDP) by 2040. That level of debt would far exceed the historical average of approximately 40 percent debt to GDP.”
Spurring economic growth and adding jobs puts America on the right track, Peterson believes. “Tax reform done right will promote economic growth, increase fairness and simplicity, and improve the nation’s fiscal outlook.”
Peterson concluded taxes and tax reform must follow eight principles: fiscally responsible, pro-growth, realistic, comprehensive, fair, simple, permanent and bipartisan.
The bottom line is tax policies must be carefully crafted and coordinated at the federal, state and local levels.
Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com.