As the number of days on the legislative calendar dwindles, the Heritage Foundation hosted a panel with members from the Freedom Caucus to discuss the “Principles for Tax Reform” and how to keep the process on track. During the event, Mark Meadows (R-NC), Dave Brat (R-VA), Warren Davidson (R-OH), and Jim Jordan (R-OH), shared their plan to get tax reform to Congress before the August recess. Unlike in the early development of the American Health Care Reform Act of 2017, the freedom caucus is playing a key role in the formation of this reform package. Each member expressed optimism, a sense of urgency to fix the tax code, and desire to rein in government spending.
Following the introduction of the panel, Congressman Meadows laid the groundwork and the direction of the conversation. He explained that there was no consensus on border adjustability within the Caucus, commenting that it would raise government revenue by 1 trillion dollars over a 10 year period. Although there was disagreement over the tax, Meadows stated that “The time is of the essence,” when referring to the foreseeable problems that await if the tax bill fails to become law. During the event, all four panelists agreed on the following points regarding tax reform and budgetary oversight:
Tax reform will grow the economy and create jobs. U.S. productivity has been hovering below 2% for the last ten years, which has impeded the GDP growth rate. The members explained that in order to grow the economy at 3%, they needed to fix the supply of labor and not rely on short-term monetary policy and government spending, which has had little effect on the long-term growth. They argued that cutting taxes would incentivize workers to work harder, boost productivity, and would ultimately create jobs. In addition, the Caucus proposed a 20% corporate tax rate, doubling deductions, and a reparation for foreign earnings over the next 20 months at an 8% rate (which is part of the House Republicans “A Better Way” plan).
Government spending must be reined in. The panelists warned that in 2034, federal revenue will only be sufficient to fund non-negotiable entitlement spending, squeezing the budget for other priorities that include military spending.
Time is of the essence. Congress has an historic opportunity to fix the tax code, but, as Jordan said, “If you don't get a budget agreement, you can't get reconciliation. If you don't have reconciliation, you can't get tax reform.” The Freedom Caucus has shown that it is willing to compromise on certain issues as long as they pass resolutions that align with their goals and the needs of their constituents.The Caucus members indicated they would be willing to support a higher level of spending as long as reconciliation instructions include welfare reform.
Despite disagreements over provisions within the House’s tax plan, the panelists conveyed that there is a real opportunity to make changes this year. Congress should not let this opportunity slip by.