How to Pay for Trump’s Tax Cuts

The magnitude of our fiscal challenges demands bold action.

While the GOP may not speak as loudly about our fiscal situation as it once did, this week's Republican convention offers a good chance to do so -- and to offer something positive. The situation is indeed dire. The national debt has reached staggering levels, and the next president will inherit a ticking time bomb of fiscal deadlines that could significantly worsen the burden. The potential expiration of the previous (and popular) Trump tax cuts is one such fiscal cliff. However, it also represents an opportunity: Pay to extend Trump's cuts by cleaning out the tax code of unfair, costly tax breaks that aren't shared by enough Americans. Congress passed the Tax Cuts and Jobs Act in December 2017. By the end of 2025, roughly all the individual tax cuts and two important business provisions will expire. While deciding which provisions to extend, legislators must take two things into consideration: the impact on economic growth and on the deficit. Considering that there seems to be general bipartisan agreement on keeping a majority of the tax cuts and maintaining growth, let's focus on the deficit question. I firmly believe that any new costs or extensions of current policies must be paid for. We simply cannot afford to keep adding to our debt without considering the long-term consequences. A sensible place to start is by examining the myriad tax expenditures that have turned our tax code into Swiss cheese. According to the Treasury Department, there are 165 tax expenditures (think revenue losses due to tax carveouts), which is up from 53 in 1970. We should start by eliminating the ones that distort economic decision-making. The goal is a neutral tax system that doesn't favor certain activities or industries over others. That's one reason tax expenditures aimed at social engineering should be on the chopping block. Tax expenditures that add complexity to the tax code should be prime candidates for elimination too. Simpler tax systems reduce compliance costs and are more...