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Up next, more from the Freedom and Progress Conference in Washington, D.C. Conservative tax policy analysts discussed the prospect of renewing the Tax Cuts and Jobs Act following Republican victories of Congress and the White House in the 2024 elections.
The tax legislation was signed into law in December 2017 by then President Donald Trump during his first term.
Which is not to be missed.
Our next panel, which is the all-star tax reform panel, the coming battle over the expiring 2017 tax cuts, starring Grover Norquist of Americans for Tax Reform, Ryan Ellis, and Daniel Bunn of the Tax Foundation.
So come on up, guys.
All right, I clap.
I clap for this group.
Hooray for taxes.
All right.
Well, we set you up this morning.
There's, I would argue that there's no more important battle facing the next Congress than this battle over the tax cuts, especially because tax policy is something that the Senate can handle with 53 votes as opposed to a lot of things which require the filibuster.
So I throw it open to the group.
Like, where do things stand?
I mean, obviously, in terms of Republicans who are thinking about tax policy, they couldn't assume that they were going to get the trifecta.
They had to plan for all these different scenarios.
Did they plan for the trifecta and are they ready to go?
I think plenty of policymakers on Capitol Hill on both sides of the aisle were planning those different scenarios.
And I think Republicans were certainly looking at a potential trifecta, thinking through what they might want, both on the tax side and on the spending side.
But I think one of the interesting things is that in any of the scenarios, there was already like 90% agreement on the package because of the 400K threshold in the Democrats' campaigning points.
Explain to people what that is.
It essentially said the Democrats didn't want to increase taxes on anybody making less than $400,000, which is the vast majority of people in the country.
So once you have agreement on kind of that, then there's a lot of things that you can work with.
But I think Republicans are pretty prepared and ready to go.
House and the Senate leadership and the House and Senate Senate Finance and Ways and Means have been working on this for more than a year.
They're committed to just taking the present package and extending it out 10 years.
So basically a complete renewal of all the provisions of the existing 2017 bill.
And what CRAPO has said, and the House guys agree, is we don't pay for present policy.
So this argument that some on the left are trying to destroy the ability to keep taxes low by saying, oh, if you're going to do anything to re-up the tax cuts, you have to go steal another $5 billion someplace, $5 trillion someplace else, which just kills the package.
So CRAPO has said, look, we're not paying for it.
We didn't when we extended the Bush tax cuts, and that was when Obama was the President of the United States.
We said, we are not paying for present policy.
The other guys like present law because it all disappears, and then they said, oh, now it's all new.
And the answer to that is no.
So what we do is we start with that.
And then the question is, what can you build onto that?
And the kind of topics that people have looked at is one's the list the president has, which is you go to 15% on the corporate income tax.
Interestingly, if you take, you go from 21% down to 15% and you eliminate the salt deduction for corporations.
The state and local tax deduction.
The state and local tax deduction on corporate.
The reason we didn't do this back in 1617 was Iowa.
Iowa has a top rate corporate had then a 12% corporate rate.
It also had two Republican senators whose votes we needed.
And so you just couldn't get rid of or even limit salt deductibility at the corporate level.
Now we have a governor and a legislature in Iowa, a governor who should be president shortly someday, and a state legislature that is great.
They've taken that rate from 12 to 7.
It's going to zero.
So nobody in Iowa cares about salt for corporate.
And frankly, we're fine nationally with that.
So you do get rid of salt and you take the rate to 15.
Those are almost exactly the same number.
So that's a quote-unquote revenue-neutral reform that would be powerful in growth and fits the president's list of things to do.
The other is indexing capital gains for inflation, which the president was prepared to do, and he got talked out of it by his Secretary of Treasury, but it was all lined up.
Ted Cruz has introduced the legislation to do it.
House and Senate both have legislation.
Bush 41 was going to do this and chickened out by executive order.
But that's simply you say if you bought something for $100 and you sell it for $200, but during your lifetime or in between the two times you bought the house, the land, the stock, if inflation's $40 out of the 100, you only pay capital gains on the 60.
That would be, on average, for Americans who hold assets for any length of time, about a 40% cut in the effective tax rate on capital gains.
And the Democrats have voted for this twice.
They passed it in the House.
They passed it in the Senate under Schumer.
Now, in bills that they didn't think were going anywhere, but they have passed it, House, Senate, Democrats doing it.
And they've often said, we don't mind getting rid of the inflation tax in capital gains.
They loathe a lower different rate.
But they have always said getting rid of inflation is fine by us.
They didn't want to do it today.
They didn't want to do it tomorrow.
But they're not going to bleed on that one.
That's one that technically you could do by executive order, but you could also do it legislatively.
Ryan, what's your take on the no tax on tips pledge?
That's been a hot topic on the campaign.
Well, you can structure it in a number of ways.
That started out as a sort of campaign promise, rhetorical.
But there's a lot of interesting questions design-wise if you wanted to structure that.
You could either make that a very expensive tax cut, you could make it a less expensive tax cut.
Some design questions would include, are you including FICA in that or not?
Are you including people who get a tip?
from any industry or just traditionally tipped industries or hospitality type industries.
Are you putting a means test on the benefit or not?
So there's a lot of levers that can be pushed.
And it became, you know, along with a couple of other ideas that President Trump had in the campaign, kind of a punchline here in Washington of, oh, well, no tax on tips is in the unserious.
There's a way that you can design that particular tax benefit so that it doesn't really break the bank here.
And you can deliver, you know, I would say smaller but outsized political advantages in what we're doing.
Another one that I would put up that the President mentioned is homeschool expenses to be qualified 529 distributions would be one.
Another one I would say is Social Security benefits, not being taxable is not nearly as expensive as it sounds if you take it very literally, what he said.
You could design that in a certain way.
So there are some wins in here that I think the President can get that will really animate his support for this.
The one thing I would say in the process, which was your original question, is the thing that looms over a lot of this early in the year is what happened last time with Obamacare repeal.
Because Obamacare repeal, we really were the dog who caught the car last time in 2016.
We were not particularly prepared for the replace part.
We were prepared for the repeal part, but we weren't prepared for the replace part.
We got dragged down.
That failure in the middle of 2017 is what animated tax reform in the second half of 2017.
They are determined, especially with the size of the House majority they have, not to let that happen again.
That's why they've been meeting constantly inside, outside, stakeholders, both sides of the hill, committees, leadership, and they want to be ready on day one to get this done early.
To what degree are Republicans, or at least enough Republicans to thwart a majority, concerned about, from an accounting standpoint, fully renewing the 2017 bill would increase the deficit relative to current law by $4 to $5 trillion over 10 years?
I think there are some kind of prominent voices.
It's not clear how much sway they'll have in the final outcome.
But one of the interesting things, and it's a dynamic that's kind of different in the House versus the Senate, is there are still some prominent fiscal conservatives that, you know, to Grover's point, may not necessarily be interested in whether it's current policy or current law, but look at the long-term impact on the debt, which you, you know, if you just focus on the 10-year budget window and some of these baseline issues, you know, you can play around with.
But if you're looking at the long-term impact on the debt, that's what some of these folks will care about.
But it comes back to a question of how much sway will they have and whether, to Grover's point about the chairman of the Senate Finance Committee or upcoming chairman of the Senate Finance Committee, Mike Craipo, what he would be interested in and what the Senate would be able to pass.
Because if the Senate's interested in something that doesn't necessarily have as many offsets or essentially no offsets, and the House sends them something with a lot of offsets, then you might have a period of time where there's a little bit of a divide or a discussion about, well, how do you get something back to the House that would ultimately make its way to the President's desk?
Speaker, Mike Johnson is not going to be sending a tax increase over to the Senate.
That's not happening.
Jason Smith, Ways and Means, is not doing that either, nor is the Ways and Means Committee.
There is some interest.
Chip Roy would like to be sure that we get rid of the tax credits for electric vehicles.
And that is, in fact, a tax increase.
It could be used to offset additional tax cuts in various ways.
That is something that the President has endorsed.
For heaven's sakes, it's something Elon Musk has endorsed, which evidently makes it easier now.
So getting rid of those would be very helpful.
The other one that actually, if you're looking for pay force, which is what we had to come up with when Chip Roy wanted his tax increases by getting rid of the electric vehicle tax credits, no Republican could vote for it because there was a tax increase.
So we sat down and came up with getting rid of the $80 billion in more money for the IRS, because that was scored by their CBO as about $300 billion, revenue gained by spending $80 billion on the IRS.
So getting rid of the $80 billion was a tax cut of $300 billion.
And that's what canceled out the tax increase that Chip Roy had through the electric vehicles, and it was therefore revenue neutral.
And then the House could pass the bill.
So another pay-for, if somebody wants a pay-for to feel good, just so everyone knows, Chip Roy Ovik Roy, no relation.
Though he is my congressman.
Yeah.
Congressman of Texas.
So he obviously doesn't like the corporate welfare part of it.
The challenge is technically, not just technically, in reality, getting rid of a tax credit is a tax increase and needs to be offset because 85% of all the House incentives signed a pledge never to pass a bill that's a net tax increase.
So that's one of the factors.
I did pass out for the tables this chart which shows from 1932 until 1994, the yellow line, that's 62 years, the Republicans controlled Congress twice, once under Truman, once under Eisenhower.
The yellow line, after which Republicans have controlled the House half the time plus, started the day that the 96 percent of the Republicans signed the pledge never to raise taxes, and they've kept it since.
There hasn't been just to be clear on that, Grover.
So as most people know, you have this no tax increase pledge, the taxpayers' pledge that lots of candidates for office sign, including members of Congress.
In order to comply with the pledge, do members of Congress have to vote for a full renewal of this 2017 tax cuts?
I don't think you go to the American people and say your taxes are going up $5 trillion, and I tolerated it.
So somebody who votes for, say, the Kamala Harris approach of, well, let's keep it except for the 400K and above crowd, that would be a violation of the taxpayers' pledge.
Well, if, depending on what else is in the package, if it's overwhelmingly more than the, if it's a net tax increase from present policy, which it will be, but I don't think they're not going to pass a bill that differentiates the Democratics if they ran things.
The reason why we had to do this last time is because we had a Democratic president who only let us protect the people making under, was it $400,000 that year?
I think it was $200.
Yeah, well, we were going to get to $400,000, except the Smarty Pants in the House voted down the million that Nancy Pelosi said, we won't tax anybody who makes less than a million.
And the House leadership said, great, let's pass that bill.
And a handful of conservatives voted no because they wanted more.
When it went to the Senate, the negotiation took it to $400,000, to about two something.
It would have been $400,000.
That was the deal everybody was ready for, except clever people.
Clever Republicans.
Clever Republicans who didn't know what they were doing, let the enemy good be the enemy, the perfect, which you can never get.
That was a tragedy.
If you make more than $200,000, you can call the people who did that and thank them.
But I don't think that's not happening again.
And, Ovik, to be clear, what would happen under the Kamala-Harris plan that you said, most family-owned and small businesses in the country would see an effective top marginal tax rate hike from about 30 percent today to about 40 percent.
That's a massive tax increase for small businesses.
You would see the death tax standard deduction essentially cut in half, so you'd have hundreds of thousands of more families affected by the death tax.
And you would see, most importantly, for growth, I think, all the expensing that we've done on research and on tangible personal property like computers and furniture and equipment be stretched out to very long depreciation lives, hurting growth.
That's the economic cost of what would happen under what you it's not simply do you make more or do you make less?
The type of taxpayers who are making more also are disproportionately business owners and capital investors.
And let's let's this may be too wonky-free C-SPAN.
We'll have to see, but I know the C-SPAN audience is very intelligent.
One of the very complex aspects of the 2017 Tax Cuts and Jobs Act was the way it reduced the tax rate for pass-through businesses, which again, I won't even bore everyone with all the acronyms.
There at least has been over the years some interest in kind of making it less complicated, less confusing, because a lot of small businesses feel like it's gotten a lot worse to file your taxes if you're in that situation.
What are your thoughts about that?
So, the approach that was taken was kind of out of political necessity.
There was a point in the 2017 debate where the bill probably would not have become law if there wasn't something for pass-throughs.
Where we are now, I think there's a lot of political interest that's dug in on that issue, kind of trying to keep the policy where it is, because sometimes in legislation, once you open the book a little bit, people really want to adjust things.
I haven't seen many proposals from members of Congress to really tweak and improve this because, I mean, this is a $20 billion annual compliance cost.
That's smaller than the tax cut, but it's a hugely complex issue.
And honestly, I would love for lawmakers to kind of look past this and look more towards things like corporate integration.
That there was a lot of intellectual heft and policy work behind leading into 2017, but didn't really make it into the final policy proposal.
But that would essentially take the tax code out of the decision of whether you're a pass-through or a corporate corporation.
I honestly, you know, going into next year, that policy work hasn't really been developed.
And I expect, you know, maybe Grover or Ryan would disagree with me to see the pass-through deduction kind of maintained very close to where it is in current law or current policy.
Maybe some tweaks around some of the gamesmanship to be eligible for that.
But I think it's a part of the debate that not many people really want to greatly adjust at this point.
So, for people who aren't familiar with the Tax Foundation, you've been around since I think 1934, if that's 1937, okay, so New Deal era.
The Tax Foundation played arguably a bigger role than almost any other outside public policy research organization in the debate over the 2017 tax bill.
You guys were constantly putting out analyses, looking at the distributional effects of the tax changes, what the fiscal effects would be, particularly because there was a lot of debate around is this only a tax cut for the rich or are all income brackets benefiting from it?
In fact, all income brackets did benefit from the TCGA, according to the Joint Committee on Taxation, according to your own work.
How do you think about going forward in this new tax debate we have?
What's the Tax Foundation preparing to do to be a part of that discussion, that debate?
Yeah, so I can't take credit for any of that work in 2017.
I was working on Capitol Hill in the Senate at the time, on the receiving end of a lot of Tax Foundation's work.
But you hit the nail on the head, Ovik.
Our bread and butter is using our taxes and growth model to analyze different legislative proposals and look at them from a multitude of angles, just the fiscal angle, revenue impacts, and dynamic revenue impacts, how the economy shifts in response to tax policy and what that means for federal tax revenue, and the distributional impacts.
I think one thing that's going to be really closely watched by Tax Foundation and has been over the course of the last several years is how the tax policy interplays with whatever tariff policy we might see out of the White House or Chairman Jason Smith has mentioned even potentially legislating some of the tariff policy.
And you get kind of offsetting growth impacts, different distributional impacts that I think are going to be really critical to the debate and important for lawmakers to really understand in order to be able to defend whatever the policy package is with the American public.
Grover and Ryan, what's the Republican Congress's attitude towards the Trump tariff proposals?
Well, I think everybody in farm country, and that's more state, Senate than House, remembers that the reaction to tariffs on China were for China to do great damage in their purchasing to American farmers.
And so while Trump used the tariff to get Mexico and Canada to do certain things that he wanted to do, when that was applied to China, the reaction was one that was problematic for farming.
So I think the President is fully aware of that.
There's an argument for using tariffs as a negotiating tool.
But farm countries, they're farmers everywhere, but some states have more farmers than others, are sensitive to how that can play out.
And the question of the great work that Tax Foundation did in making it clear that tax rate reduction doesn't always lose the amount of money that CBO or OMB would like to pretend it did, and they were way off on the corporate rate coming down.
Corporate rate American was 35 percent.
Those other guys, not us.
Just to clarify.
Yes, yes.
The government agencies, fiscal scorekeepers in Congress.
Yes.
Oh, no, no.
You guys were moving in the right direction in terms of the importance of rate reduction and what that does for growth.
But revenues that came in from the corporate income tax at 21 percent today is much higher than was projected if we'd kept the rate at 35.
But I think more importantly, and at Americans for Tax Reform, we did focus groups and polling when we were passing that rate reduction and found out that the American people really have a pretty good understanding that when you tax a grocery store, there is no Mr. General Motors who pays the corporate income tax.
There are employees who get lower pay increases or fewer employees because you've taken a million dollars out of a business and if their 70% of that business was their money that they earned was going into payroll, when you take a million dollars out, the incidence of that hits workers first.
If you don't have a terribly competitive market, then you can raise prices so consumers get whacked.
And if you do enough damage to a business or a company and the stock market goes down as a result, the stock price goes down as a result, people's 401ks get hit.
The people who pay the corporate income tax are there's no Mr. General Motors.
It's consumers, higher prices, it's workers in lower wages and layoffs, and it's investors in a reduction in their 401ks or IRAs.
When we get past this idea, because the left likes to say we're going to tax rich people and corporations, when they realize that the corporate income tax is a tax on workers, consumers, and people who are saving for their retirement, the only reason to have a corporate income tax is to pretend you're not paying for taxes that Democrats raise.
They hide it, and they think that you're fooled by that.
I was pleasantly surprised by both the polling and the focus groups.
People saw that.
When Reagan was talking about it once, he said we should get rid of the corporate income tax.
It's just a tax on people that's hidden.
And the press for about a day and a half attacked him for that.
And then they shut up.
They did not want a discussion of that subject.
They literally dropped it into the memory hole.
And I think we should discuss that all day, because we need to take off the table the idea that the corporate income tax is free money that you don't pay for.
And Olvikt, I think the answer to your question is there's not a lot of support among even newer Republicans on the Hill for tariffs, but they're not looking at this in isolation.
I think they're looking at this in terms of we want to get to a lower corporate rate.
We have some looming international tax increases that are happening on the international side of what we set up in TCJA, guilty feet, guilty beat, fitty, all the things that the C-SPAN audience alphabets and the others will not.
So those things have some looming tax increases in there.
Europe is trying to impose this global minimum tax on everybody.
These are all of apart.
These are all are something that they're looking at as a unified whole.
So even if they're not a fan of that isolated piece of it on the tariff side that the president has introduced, they're very interested in what's happening internationally and the way that we're going to look at an international tax system after next year.
I want to tee it up for questions from the audience.
So get your hands up and we'll get the mics to you.
But before we get to questions, for each of you, what's your favorite tax reform idea that isn't a pipe dream, that actually could realistically pass in the next Congress if we're able to get in front of enough people to pitch it?
So one of the things that was done in the Tax Cuts and Jobs Act and has been done at different points over the course of the last 40 or 50 years is changes in how companies deduct their expenses for capital investments.
In the Tax Cuts and Jobs Act, we provided an immediate 100% expensing for capital investments instead of having to write these things off over a number of years.
What's a real world example?
So if you buy a tractor or a heavy piece of equipment, instead of being able to take that cost and deduct it against current tax, you would have to spread that out over sometimes 10, 15 years, depending on the way the tax code defines that asset.
And you lose the value of those deductions because of the inflation and the time value of money.
What I would like to see is an expansion of the thinking around this and expand it not just to equipment and machinery, but looking at structures as well.
The depreciation schedule for structures is extremely long.
And for folks who are thinking about housing costs, thinking about opportunities for building in new areas, building new factories, there's opportunities for doing things on the depreciation for structures, something very wonky.
We call neutral cost recovery that's been around in an idea and discussion since the 70s.
But that, I think, is something that could make its way either that policy itself or something on the depreciation schedules for structures.
That's a great idea, and I think it's on the list of things that could clearly happen.
I think if you make a list of the things that Trump has spoken to and that some of the Republican leadership have looked at, you see a collection of things that are doable.
John Thune is the Republican leader from South Dakota.
His issue that he has talked about for years is getting rid of the death tax forever for good.
I think that's likely to happen as a result of his being the Speaker, being the leader on the Senate side, on the Senate Majority Leader.
The President has supported the idea of indexing capital gains for inflation.
Ted Cruz has the legislation there.
Jason Smith, the head of Ways and Means Committee, has been a leader on these issues as well.
That's one that, again, the Democrats have both endorsed, voted for, and said they don't really oppose.
So it's not humiliating.
If you pass that on top of the rest of it, they wouldn't feel that you'd been mean to them.
The other one is we Americans, not we, they, the United States government, taxes Americans who live overseas.
If you work in France, you pay French taxes and then American taxes.
There's some exemption, but largely pay American taxes on top of that.
If a French person works in the United States, he pays American taxes.
We don't pay French taxes.
That's a huge one because what we don't have in America is tax competition at the national level, right?
If France raises taxes too much, the French can move to Switzerland or Italy or whatever, but Americans don't have that same setup because you get taxed as an American regardless of where you live.
And it's kind of like New York State can't raise taxes too high because if they do, people will move to Florida or Texas as they have been.
But we don't have that at the national level because we're one of the two countries on earth along with Eritrea that taxes Americans wherever they are good company.
And watch Carol Miller's effort to not have everybody reporting their 1099 Ks every time they send money back and forth on Venmo and having to have all that stuff.
She's really been the leader, Carol Miller of West Virginia, on getting that back to where it was before Obama did it.
Ryan, what's yours?
Well, for the record, Dan and Grover just stole my first, second, and third operations.
You're welcome.
Well, there's consensus then.
Thankfully, I've got plenty more.
So here's the fourth.
The fourth option I'd throw in there is one that's been talked about a lot.
It's universal savings accounts.
That's something I think that would be a very, very good innovation.
Universal savings accounts would basically take, you'd say, look, if you like your 401k, your Roth IRA, your HSA, your 529 plan, you can keep them.
We're not getting rid of any of those things.
What we're going to do is create a simple account anyone can use, anyone can fund.
We can put a high amount in there, maybe $10,000 or $15,000 for every person in America.
You could do it on behalf of your children.
You could do it on behalf of your non-working spouse.
You could do it on behalf of yourself.
The money goes after tax into the account.
You can invest it any way you want.
And then you can take it out anytime you want for anything you want.
That's what a universal savings account would be.
Doing that would for most Americans make the capital gains and dividends tax kind of redundant in comparison, especially when you combine it with existing 401ks, existing IRAs, existing HSAs and 529 options.
It would also allow Americans that don't want to deal with all of that and don't want to have to hire tax people or financial advisors to help them deal with all that.
So, you know what?
I'm okay with this universal savings account.
I'm just saving in that.
I've been saving in that since I was a kid, or my grandparents have been putting money in that for me since I was a kid.
It's the account I've had for a long time.
And I'm going to use that to buy a home, to start a small business, to fund my current health care needs, to fund my child's education needs.
And it's also a retirement account.
And let's say we can also pass that along tax-free, because one of the other great ideas here was getting rid of the death tax.
Like, I think that's something we should definitely look at.
That this should be something that is exempt from the death tax, and you can pass it along to your kids.
And whenever they want to take the money out, is when they can take the money out.
Great.
All right.
Questions?
Whoever's got the mic, just go ahead.
Hey there, Brandon Arnold, National Taxpayers Union.
So we are in this boat that we're in today because in 2017 we used the reconciliation process and because there were deficit impacts outside the 10-year window, they had to shorten the tax cuts.
So the tax cuts, the majority of the tax cuts, I should say, expire at the end of 2025.
So going forward, we're going to be using the reconciliation process again.
We have two basic routes.
We can either again replicate what we did in 2017 and maybe have a seven or eight year tax cut package, maybe even shorter, if we're going to have deficit impacts outside the 10-year window.
Or if we pay for the entirety of the package, and that means digging deep, finding those credits, deductions, and so forth, including spending to offset the entire cost of the package, we could then pass a 10-year, I'm sorry, a permanent tax package, not have to go through this exercise again, provide more economic growth if we structure it properly, and who knows who's going to be in office seven or eight years from now when this thing expires.
And we don't have to roll the dice there.
So which route should we take?
Should we do a shorter package that would be temporary, or should we offset the entirety of a package and have something permanent?
Well, that is the left's argument that we should not have a tax cut at all.
We should have this take $5 trillion that will be a tax increase as soon as we step away and don't decide to include it.
And that would be a $5 trillion tax increase.
And then maybe there should be some tax cuts as well.
That's, to be clear, that is not going to pass Thune's Senate.
That is not going to pass Jason Smith's House.
And it's not going to be signed by the President.
We have used reconciliation in the past to make tax cuts as strong as we could, as long as we could, and then we've come back and been able, even with Obama's president, to salvage most of the continuation on that.
So we are getting an argument from some left-wing structures and the Democrats.
Oh, don't raise taxes, don't cut taxes at all.
But they start by we're going to raise taxes $5 trillion by allowing the tax cuts to lapse.
And nobody voted for a Republican Senate, a Republican House, and a Republican President to support a $5 trillion tax increase or any piece of that.
That is the sort of thing that the left might have argued for if they had the House, the Senate, or the Presidency.
They don't.
The Democrats in the House and the Republicans in the House and Senate have all committed never to raise tax increases.
And the president has said, I'm a tax card.
Every single one, every single member of Congress.
No, 85%.
85% on both.
But the leadership, all the leadership has.
And some of the guys who haven't sort of never got around to it.
But no, this is, it's also Republican Party platforms material.
So that's not an option.
It would be an option if the Democrats had won, because then they'd do it.
But they'd do whatever they wanted to if they had the trifecta themselves.
So I'm not concerned at all that we're going to start by saying, let's raise taxes $5 trillion and build from there.
We are not going to raise taxes $5 trillion, and we're going to build from continuing that.
And again, Jason Smith and a friend, Mr. Crapo, Senator Crapo out of Idaho, have made it clear we're not paying for existing policy.
That is policy.
It will continue.
That's what we ran on.
That's what Republicans ran on.
The Democrats will keep saying, why don't we raise taxes?
And the answer to that is no.
So I think there's a bit to your question, Brandon, and in Grover's response that kind of leans towards something expiring in order for those budget rules to work.
Right?
And the question then is, okay, if there's going to be an expiration at some point, how do you make the most important things as permanent as possible and then gamble kind of like folks have done over the course of the last several decades on that next kind of political majority?
Permanent policy is always better, but there's also a budget like budget math that you have to make work because of the reconciliation rules.
But I think on the pro-growth side of the ledger, there's opportunities for permanent bonus depreciation, permanent treatment of research and development expenses and things of that nature.
But I don't necessarily see unless somebody is, you know, whether it's Grover's approach this of saying we're not going to vote for a $5 trillion tax increase or the budget math just saying that's a $5 trillion change in the long run debt to GDP ratio.
I think it lends itself, unfortunately, to something temporary.
But my hope is that there will be enough momentum either on the spending side or with the Inflation Reduction Act stuff to make some of these things as permanent as possible.
I think Dan's right there.
If we look back at 2017, it wasn't an all-or-nothing decision back then.
The decision was made to have most of the corporate provisions be made permanent and for the individual and for the pass-through community provisions to be made temporary because that's what they could fit in at the time.
So if we're doing a similar exercise here, I think the triage needs to be along the lines of what Dan's saying is what are the most pro-growth aspects that we can try to make permanent?
I would throw 199A, QBI, in there for pass-through businesses.
That's a huge marginal tax rate increase on those businesses if that were to be allowed to expire.
I would do everything I could to try to make that permanent, along with full expensing, full research expensing.
I'd make a run at eliminating the death tax and at the very least keeping it where it is, making that permanent.
Those type of things I think we can take a look at.
And there are, without having to resort to tax increases that are new, I think there's existing policy in TCGA that can also be extended that can help out with some of the budgetary concerns.
I think things like student loans is something we can take a look at on the mandatory spending side.
The IRA tax credits are something we can take a look at.
Corporate SALT is something that we can take a look at.
We can also make some progress on the corporate rate for bringing it down to 15.
I don't think it's an all-or-nothing.
I think we can pick and choose what are the best pro-growth things we can do, what can we politically do to make those things permanent, and then operate in the same type of triage that we did in 2017.
You make permanent those things the Democrats are most likely to kill.
The corporate income tax rate to 21 was made permanent, taking it to 15 with the offset being the elimination of state and local taxes deducting from the Federal.
That can become permanent.
What you leave are, and the Democrats line each time is, oh, we're not for taxing anyone who makes less than $400,000.
Since they lie about corporate, let's get that off the table.
And then they'll come back.
They're not going to raise the kind of taxes that if they ever came back into power at the end of 10 years, they're not going to go in for the pro-child tax credit and for the higher original deductions.
They're not going to touch that because that puts the lie to the fact that when they attack the bill, they say, oh, it's just for rich people, except obviously most of it isn't.
And the part that we will let them re-up in the future isn't either.
So they'll cheerfully have to either vote for or hold their, you know, shut up about it as it moves forward.
Yeah, I can see what you're saying in terms of the political strategy piece of it.
Okay, we have time for another question.
Is there one on this side?
Yes, go ahead.
Luke.
Thank you, Ovik.
I am Rod Richardson, the president of the Grace Richardson Fund and co-chair of the Climate and Freedom International Coalition meeting, co-chaired in conjunction with Tholis Foundation.
And tomorrow morning we are going to be having a discussion about the IRA and either repealing the-repealing those subsidies or maybe even replacing them.
So we have Republicans like Nick Lalota in New York who say they favor some of those subsidies because they bring money in.
So even Republicans, there are going to be some of those guys arguing in favor of that.
What arguments can you marshal, first of all, to show that those subsidies are really not very effective for the climate at all?
And secondly, are there alternatives that you can offer in terms of tax rate cuts that are more free market-oriented, more genuinely supply-side, that do something for the environment, that have an environmental benefit?
What can you point to that is environmentally beneficial in supply-side tax policy?
And let me just to give some background for those who aren't following this.
So the Inflation Reduction Act, which was passed in the early part of the Biden presidency, it did two things.
One, it empowered Medicare to negotiate prescription drug reimbursement rates within the Medicare program.
And those savings were used in part to fund a very large tranche of subsidies for green energy projects like wind and solar and also nuclear energy and a couple of things.
And there's been some talk about some of those subsidies being the pay for for the tax bill.
Yeah, so on the supply side, I mean the expensing policies that we've mentioned before, including expensing for structures or adjusting depreciation schedules, those on a fiscal basis cost less than half of some of these big packages that have been pushed through during the Biden administration.
So moving to those is going to be more market-based because companies, regardless of whether they are able to get a check from the Treasury, will be able to use those deductions to support their investment.
And whenever you're updating your machinery, updating your plants or building new plants, there are all these different standards.
You're going to be updating that with probably cleaner equipment and cleaner footprint.
So those are the things that I think are going to be really important for Republicans to marshal in their arguments against those other policies that honestly should be repealed.
All corporate subsidies are a bad idea because they corrupt our team.
They're trying to buy our team.
We need to replace them with reduced rates to have economic growth and go to these groups and say, if you want to have stronger growth, let's take the corporate rate down, let's take the individual rate down, which is a tax on small businesses, the 5 million pass-throughs, pay the individual rate.
We need to talk about that.
Let's cut the individual top rate and dare the Democrats to say we want to declare war on 5 million subchapter S pass-throughs.
Let's take rates down and to the extent that we can eliminate either checks being written or the left is trying to turn the IRS into a welfare system, writing checks to people, refundable tax credits.
That's just a bad idea.
Very short answer for this.
There's a high correlation between economic growth and a cleaner environment.
If you take a look over the last 50 years, and health, overall, no matter what metric you want to use, growth is the answer.
And how do you get growth from the tax code's perspective?
Two things.
A consumption base, which I don't mean a sales tax, I mean a consumption base, where you're exempting either savings or the yield on savings, investment or the yield on investment, and very low internationally competitive marginal tax rates.
Those two things combined will give you the highest economic growth and it'll give you the cleanest environment.
Well, that's a great place to end it.
Our team at FreeOp is the Americans who have the most to benefit from a pro-growth tax code, and we look forward to having you back next year to see how you did with these ideas.
Thanks, everybody.
Thanks, guys.
All right.
Thanks so much.
This evening, CDC Director Dr. Mandy Cohen will discuss serving as director of the agency, citing successes of the Biden administration and some of the public health challenges ahead at the state and federal levels.