Republicans have long been known as “the stupid party.” They do stupid things, like waiting until mid-November to pass a must-pass tax cut that should have been done by April.
But in recent weeks the GOP is finally showing some brains and some backbone on taxes. They are using their majorities in Congress to roll back and roll over the left, and it’s about time.
In a more rational world, tax reform could have been bipartisan. But once Democrats declared they would be unified obstructionists on tax reform, there was never reason to throw a bone to the “resistance movement.” Playing nice with Chuck Schumer won’t buy any votes, so why bother?
Instead, it’s hard not to be impressed with how Republicans have suddenly gotten very smart on the “pay fors” in their tax bill. Three of these revenue raisers are welcome policy changes, and they help defund the left.
Start with the elimination of the state and local tax deduction. I would be strongly in favor of this no matter which states lose the most. Washington should never subsidize flabby and inefficient state and local services and bankrupt public pension programs.
But, just as one would predict, the states with the highest taxes — California, New York, New Jersey, Connecticut, Illinois and Minnesota — are all Democratic controlled states. There is no evidence that higher taxes in these states lead to better schools or police protection. New York spends $7,500 per person on state and local government, while New Hampshire spends less than $4,000. Yet public services are better in New Hampshire than in New York.
Liberals aren’t stupid and they understand the repercussion of this policy. The big blue states either cut their taxes and costs, or the stampede of high-income residents from these states accelerates. The big losers here are the public employee unions — the mortal enemies of Republicans. This all works out nicely.
Next is the decision by Republicans to offset the cost of the tax cut by eliminating the individual mandate tax imposed mostly on moderate-income Americans. About three of four who pay the tax earn less than $50,000 a year. So this is a tax primarily on poorer people, yet Democrats hypocritically want to preserve it. The purpose of the tax is to force low income Americans to purchase insurance they either don’t want or can’t afford.
Isn’t it amazing that Obamacare subsidizes (bribes) people to buy the insurance, penalizes them if they don’t buy the insurance, but at least 13 million Americans still refuse to buy it. This really is a great product.
The effect of eliminating the individual mandate will not be to throw people off insurance, but rather will allow poorer and younger Americans to buy less expensive coverage, such as a health savings account. This will lead to a slow death of Obamacare by giving people an opt out and far more health care choices. Smart.
Finally, an idea that hasn’t gotten much attention is the tax on college endowments. These are massive storehouses of wealth. Harvard and Yale combined sit on a nest egg of almost $60 billion. This is enough to give every student free tuition at these schools from now until forever and they still wouldn’t run out of money. Instead these university endowments are like giant financial trading dynasties with very little of the largesse going to help students pay the $60,000 a year tuitions or even promoting education.
The GOP plan would put a small tax on the unspent money in the endowments if they don’t start spending the money down. My only complaint is that the tax is way too low. But the first shot against the University Industrial Complex has finally been fired.
The productivity of American universities, as Richard Vedder of Ohio University has documented, continues to decline. Mr. Vedder also found that university tuitions don’t go down when these schools have bigger endowments. They go up.
These endowments subsidize the six and even seven figure salaries of pompous, tired, and tenured professors (who teach 4 or 5 hours a week) and administrators, who indoctrinate 21-year olds with an increasingly vacuous and illiberal education. The assault on free speech on campus is only the latest outrage. Bravo to Republicans for starting to turn off the spigot.
The best indication that this is all working is the rise of what I call the “tax bill cry baby caucus.” This group consists of health insurance companies, Obamacare supporters, public employee unions, state and local officials, the welfare lobby, municipal bond traders, sociology professors, lobbyists, and, most of all, the liberal politicians — who are funded by all of the above.
Not only are we getting pro-growth tax policy, President Trump and the GOP are finally draining the swamp. It doesn’t get any better than this.
• Stephen Moore is a Heritage Foundation senior fellow and an economic contributor with Freedom Works.
Copyright © 2018 The Washington Times, LLC.