OPINION:
Will President Trump merely cut taxes? Or will he transform Americans’ attitudes about taxes, setting the stage for far more sweeping and necessary tax reform in the years ahead?
This is the choice facing the president as he prepares to push for sweeping tax cuts. Mr. Trump is focused on making his 2017 tax cuts permanent while potentially cutting income taxes further and eliminating taxes on tipped wages. He knows cutting taxes is crucial to strengthening the American economy, and extending and expanding his signature first-term policy is especially necessary.
It’s hard to overstate how important those tax cuts were. They ushered in a remarkable period of wage growth, hiring and entrepreneurship, overwhelmingly benefiting middle- and working-class families. Mr. Trump was largely reelected on his promise to keep the economy moving again, so doubling down on that proven approach will empower Americans again.
However, Mr. Trump has an even bigger opportunity. So far, he’s talked about tax cuts in the terms he knows best — bigger paychecks, better jobs and a brighter future for all. The material benefits of tax cuts matter. But the moral dimension of cutting taxes is even more important.
Put simply, Mr. Trump can help Americans realize that our country’s income tax system is fundamentally unjust and holds people back. He can then inspire people to see that we need to move toward a more free and fair tax system — one that unleashes, not undermines, people’s potential.
The truth of America’s income tax system is that it stifles Americans’ ability to climb the ladder of opportunity. It’s an unavoidable consequence of a so-called progressive income tax, which forces you to pay a higher rate the more you make. This system was sold to achieve fairness — i.e., “making the wealthy pay their fair share.” In reality, America’s income taxes are highly regressive, punishing you for applying yourself and trying to realize your potential.
Any economist will tell you that if you tax something, you get less of it. What do income taxes tax, if not people’s ambition, drive and desire to rise? The more you strive, the more money to fork over to the tax man. And far from hitting the wealthy the hardest, the burdens get bigger the less you make. When the federal government takes 10% of your $10,000 income, your life just gets much harder. It hurts when it takes 37% of your million-dollar salary, but you’ll be just fine.
Of course, many Americans still push through these barriers, and some who start poor still strike it rich. But that describes fewer and fewer people. Economic mobility has fallen by nearly half since the 1940s, meaning the children of low- and middle-income families are far more likely to stay there while wealthy families stay wealthy. Do you know what else happened in the early to mid-20th century? The federal government implemented and steadily increased income taxes, ending a century and a half of the freedom and flourishing that came from not taxing Americans for how hard they work.
This is the story that Mr. Trump should start to tell. When he’s cutting Americans’ income taxes, he shouldn’t just say he’s helping to boost their incomes. He’s giving them back a share of their freedom — something the government never had a right to take away in the first place. He’s making it easier for them to enjoy the fruits of their labors, which spurs people to strive all the harder. That includes a new era of starting small businesses, which is dramatically easier when your taxes are lower.
By making these moral arguments, Mr. Trump can even lay the groundwork for doing away with income taxes. He can help people realize that income taxes assault freedom, which is wrong regardless of whether the government takes 90% or 10% of your income. The right percentage is zero, and as Americans realize that, we can move toward a more free and fair taxation system, like a consumption tax on what we buy. That’s far more just because it doesn’t punish you for applying yourself and pursuing opportunity. It would strengthen, not weaken, mobility for all.
Can Mr. Trump end America’s income tax mess in the next four years? Probably not, but that’s no excuse not to start moving in the right direction. By all means, the president should push for more tax cuts. But more than that, he should make clear that cutting income taxes is synonymous with giving Americans our fundamental rights to life, liberty and the pursuit of happiness.
• John Tillman is CEO of the American Culture Project.
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