Could Trump fail on tax bill? Why going 'big' doesn't always work out as planned

## Could Trump Fail on Tax Bill 2.0? Why Going 'Big' Doesn't Always Work Out as Planned

Donald Trump is reportedly pushing for a second major tax cut should he win the 2024 presidential election. This ambition, predictably grandiose in scope, mirrors his 2017 Tax Cuts and Jobs Act (TCJA). But could he actually pull it off? And, more importantly, does history, particularly the TCJA itself, teach us that aiming for a "big" tax cut is always a recipe for success? The answer, as with most complex policy issues, is nuanced.

Let's dive into the potential roadblocks and the pitfalls of pursuing excessively ambitious tax reforms.

The Ambitions and Parallels to 2017:

Trump's reported plan echoes the core tenets of the TCJA: further reducing corporate and individual income tax rates. He's already hinted at making the individual tax cuts of the TCJA permanent, which are currently set to expire in 2025. Beyond that, details remain scarce. However, the general sentiment points to a renewed push for significant tax relief, framed as a boon for economic growth and job creation.

The parallels to 2017 are undeniable. Trump believes, as he did then, that large-scale tax cuts will stimulate investment, boost wages, and ultimately "pay for themselves" through accelerated economic growth. This supply-side economic theory, while appealing to many conservatives, has faced significant criticism and hasn't demonstrably materialized in the wake of the TCJA.

Why "Big" Doesn't Always Work: Lessons from the TCJA:

To understand the potential challenges facing a "Tax Cuts 2.0," we need to dissect the shortcomings and realities of the TCJA:

Limited Economic Boost: While the economy experienced growth after the TCJA's passage, attributing it solely (or even primarily) to the tax cuts is a gross oversimplification. Factors like global economic trends, technological advancements, and pre-existing economic momentum played a significant role. The promised surge in capital investment largely failed to materialize, and wage growth remained tepid for many workers.

Skewed Distribution of Benefits: A major critique of the TCJA is its disproportionate benefit to corporations and high-income earners. While proponents argued this would "trickle down" to the rest of the economy, the reality was a significant increase in corporate profits and stock buybacks, often at the expense of worker wages and long-term investment.

Ballooning National Debt: The TCJA significantly contributed to the national debt. The Committee for a Responsible Federal Budget estimates that the TCJA will add trillions to the national debt over the next decade. This increased debt burden puts pressure on future generations and limits the government's ability to invest in crucial areas like infrastructure, education, and healthcare.

Political Opposition: The TCJA was passed along party lines using the reconciliation process in the Senate, requiring only a simple majority. This contentious approach solidified partisan divisions and created a lack of buy-in from Democrats. This lack of bipartisan support makes it vulnerable to future legislative changes, as we are already seeing with the potential expiration of individual tax cuts.

Roadblocks to "Tax Cuts 2.0":

Even if Trump were to win in 2024, enacting another large-scale tax cut faces several formidable obstacles:

The Political Landscape: The composition of Congress will be crucial. If Democrats control either the House or the Senate, passing a major tax cut will be nearly impossible. Even with a Republican-controlled Congress, moderate Republicans may be hesitant to support a bill that further exacerbates the national debt and disproportionately benefits the wealthy.

Economic Conditions: The state of the economy will play a significant role. If the economy is in a recession or experiencing slow growth, voters may be less receptive to tax cuts that primarily benefit corporations and the wealthy. Concerns about inflation and the national debt will likely dominate the public discourse.

Budgetary Constraints: The national debt is already at historic levels, and projections indicate it will continue to rise. This limits the available fiscal space for another large tax cut. Even proponents of tax cuts acknowledge the need for some form of spending cuts or revenue increases to offset the costs, which are unlikely to be popular.

Public Opinion: Public sentiment towards tax cuts is often divided along partisan lines. However, polls consistently show that a majority of Americans believe the wealthy should pay their fair share of taxes and that the government should invest in programs that benefit working families. This public opinion environment could make it difficult to garner support for another round of tax cuts primarily benefiting corporations and high-income earners.

Expiration of TCJA Provisions: The expiring individual tax cuts in 2025 are a major complication. The debate will likely focus on whether to extend these cuts, modify them, or allow them to expire. This pre-existing legislative imperative will consume significant political capital and could overshadow any attempt to enact broader tax reforms.

The Allure of "Big" vs. the Reality of "Effective":

The appeal of "big" tax cuts lies in their simplicity and potential for immediate political gain. Proponents often argue they are a necessary jolt to the economy and a clear signal of pro-business policies. However, the TCJA demonstrated that "big" doesn't necessarily equate to "effective."

A more nuanced and sustainable approach to tax reform would involve:

Targeted Tax Relief: Instead of broad-based tax cuts, focus on targeted relief for specific groups, such as low- and middle-income families, small businesses, or those investing in renewable energy.

Simplifying the Tax Code: The complexity of the US tax code creates loopholes and opportunities for tax avoidance. Simplifying the code would make it fairer, more transparent, and easier for taxpayers to comply.

Addressing Tax Loopholes: Closing loopholes that allow corporations and wealthy individuals to avoid paying their fair share of taxes would generate revenue and improve the fairness of the system.

Investing in Public Goods: Instead of relying solely on tax cuts to stimulate the economy, invest in public goods like infrastructure, education, and healthcare. These investments can generate long-term economic growth and improve the quality of life for all Americans.

Conclusion:

While the allure of another "big" tax cut remains strong, especially within some Republican circles, the challenges are considerable. The TCJA provides a cautionary tale about the limitations of supply-side economics, the importance of fiscal responsibility, and the need for bipartisan consensus.

Whether Trump, or any future president, can successfully enact a major tax cut will depend on a complex interplay of political, economic, and social factors. However, focusing on targeted reforms, simplification, and investments in public goods may prove to be a more effective and sustainable path towards a prosperous and equitable economy. The key takeaway is that aiming for "big" is not always the best strategy; sometimes, a more targeted and well-thought-out approach is what's truly needed.