Tax reform is just part of a larger puzzle

OPINION:

As I stated in my last column, no matter which party wins this year’s presidential and congressional elections, most of Washington will be dedicated to tax legislation, federal spending, and how to deal with the debt ceiling.

As such, the Republican Party should consider this time a once-in-a-generation opportunity to reform the tax code.

In general, tax reform and the tax code are parts of a larger mosaic of government policy. Unfortunately, when they have power, Republicans tend to prioritize ephemeral things such as lower taxes, economic growth or increased military spending.

In comparison, Democrats prefer to make structural changes, expand industrial policy or create new cohorts of dependencies — think the Affordable Care Act, the corporate average fleet efficiency standards, known as CAFE, the Clean Air Act Amendments of 1990 or the “investments” in the Inflation Reduction Act.

The Republican Party is still, at some fundamental level, dominated by those who are more interested in the tax code or tax guidance emanating from the IRS than they are in inducing structural changes in the federal government and its policies.

The hard truth is that lower tax rates or larger exemptions for whatever are not institutional or structural reform, and neither is economic growth.

With everything on the table next year, Republicans have an opportunity to make changes that will endure beyond the next round of changes to the tax code. To do so, however, they may need to temporarily shelve some of their tax preferences.

For example, they could offer to leave the tax credits for electric vehicles in place in exchange for repealing CAFE and requiring Congress’ direct instruction before regulating carbon emissions. Or for that matter, they could leave many of the tax credits embedded in the Inflation Reduction Act unmolested in exchange for durable and meaningful regulatory reform.

Offer a 10% across-the-board pay raise for federal workers in exchange for making hiring, firing and transferring senior federal officials easier and relocating agencies easier. Resolve the immigration status of those who were brought to the U.S. illegally as children in exchange for making the Tax Cuts and Jobs Act permanent. Statutorily relieve student loans in exchange for zero net growth in federal spending over the next 10 years.

Trade national school choice for the increased deduction for state and local taxes that the coastal Democrats want very much. Agree to the child tax credit in exchange for E-Verify and legitimate border security legislation. Get rid of election spending limits in exchange for creating transparency in who funds what and getting serious about running guys like George Soros out of American politics.

You get the idea. Republicans need to experience a change of heart about what might be possible next year. Restricting tax reform and a debt ceiling increase next year to the same old, same old conversations about tax rates and increasingly obscure tax provisions that are relevant to only a handful of rich dudes and companies is a recipe for failure.

Republicans must meet the moment with creativity, resolve and a commitment to work for all Americans.

• Michael McKenna is an award-winning columnist, a contributing editor to The Washington Times, and a co-host of the podcast “The Unregulated.”