December 29, 2017


The Year of Lost Opportunities : Trump's accomplishments are meager, and pretty ordinary Republican stuff. (Kevin D. Williamson, December 29, 2017, National Review)

The tax bill contains an important structural reform, implementing a "territorial" tax system that brings the United States closer into accord with the practices of other countries with advanced economies. Under a territorial tax system, corporations pay the U.S. government taxes on their earnings from business activity in the United States, and then pay to the Netherlands taxes on their Dutch activities, to the Irish taxes on their income earned in Ireland, etc. Before, the United States had claimed the right to tax the worldwide income of U.S. firms beyond their obligations to national governments abroad: e.g., if Big Bigness Inc. owes 15 percent income tax in Canada but 31 percent in the United States, it would have been obliged to pay Ottawa first and then pay the difference to Washington.

It is worth remarking that the Republican tax bill celebrated by President Trump, who purports to be a nationalist, is a great victory for the hated enemies of the Trump movement -- the people they denounce as "globalists." The move to a territorial tax system is a very big deal if you are the CEO of Apple or serve on the board of a transnational pharmaceutical corporation. Its appeal will be less immediate to the opportunistic populists who bemoan the loss of textile-mill jobs 60 years ago in towns they've never heard of and abominate the dreadful Chinese. Many of the firms that offshore work to countries such as India and Mexico will receive a welcome tax cut under the Republican bill. That's all fine, but it isn't exactly what Trump ran on, either.

Other provisions of the tax bill touched taxes only tangentially. For example, the bill repeals the "individual mandate," the provision of the Affordable Care Act that obliges individuals to purchase insurance. One of the critical failures of the Affordable Care Act -- one that distinguishes it from the more successful Swiss system upon which Obamacare is loosely modeled -- was that the mandate was too weak and toothlessly enforced. That meant that the beneficiary pool was older and sicker than it would have been with a more rigorously enforced mandate (Swiss compliance is nearly 100 percent), putting upward pressure on prices and contributing to the restriction of consumers' choices. There were two intelligent ways to go about addressing that: The first would have been repealing the Affordable Care Act and replacing it with a more market-oriented alternative, which Congress failed to do; the second would have been strengthening the mandate, which would have helped to shore up the aspects of the ACA that voters and their representatives approve of, namely the mandate that insurers cover preexisting conditions without penalty. (This turns the very idea of insurance on its head, of course, but contempt for such realities is almost universal in the American health-care debate.) Republicans are celebrating their repeal of the individual mandate, but what they have in fact accomplished is to have left a bad law in place while making it worse for the sake of political pageantry.

Tax cuts and half-assed health-care reform: pretty ordinary Republican stuff. Trump the revolutionary -- he of the syntactically aborted slogan "I Alone Can Fix!" -- has in his first year of action pursued a course of legislative action (to the extent that he actually has pursued it all) that would have been ridiculed as lily-livered if it had been offered up by Nelson Rockefeller. He did so while pursuing a rhetorical course that would have embarrassed Benito Mussolini. (Il Duce was, for all his crimes, literate.) The more imaginative and audacious Republicanism of the Jack Kemp school is for now dormant if not dead, as is the optimistic and patriotic spirit of the Reagan movement, which has been supplanted by the great and endless sneer of talk radio and the gaping witless maws of cable news.

Of course, Democrats favor corporate tax reform and Republicans could have gotten a stricter Heritage mandate included in the original plan had they legislated. Hating the other extracted significant costs.

Posted by at December 29, 2017 8:06 PM