• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Reid Throws Major Roadblock in Front of Tax Reform

    Credit: Lauren Victoria Burke/WDCPIX.COM

    Credit: Lauren Victoria Burke/WDCPIX.COM

    Senate Majority Leader Harry Reid (D–NV) has just thrown a roadblock in front of tax reform that could stall the strong momentum that has been building for reform.

    Reid said that any tax reform plan must raise significant revenue. In other words, he wants tax reform to provide cover for yet another gargantuan tax increase. Reid wants tax reform to raise close to the $1 trillion tax hike called for in the Senate budget resolution passed earlier this year.

    Reid’s demand for a huge tax increase is a serious setback, because it is contrary to the purpose of tax reform. Tax reform’s central goal is to free the economy to grow stronger by reducing tax rates and eliminating the disincentives to saving and investing that the current tax code imposes. Washington taking more money from the individuals and businesses that earn it through higher taxes would slow growth, which undermines the growth-promoting essence of tax reform.

    One of the various constraints that true pro-growth tax reform must adhere to is revenue neutrality. That means that the reformed tax system raises no more revenue than the current system under a traditional static analysis, which does not account for the stronger economic growth that would result from tax reform. Tax reform would undoubtedly help the economy grow faster. A bigger economy means the tax code will raise more revenue as incomes rise. However, higher revenue from stronger growth is not a tax hike.

    A tax reform plan that raises revenue on a static basis is a tax hike first and foremost. Senators that want to reform the tax code to revive dormant economic growth should insist that tax reform be revenue-neutral on a static basis. Otherwise, they are contributing to an effort that is primarily about raising taxes.

    Posted in Economics [slideshow_deploy]

    Comments are closed.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.