Everyone remembers the greatest political flip flop of the 20th Century, at least the last half of the century. George H.W. Bush’s famous quote, “Read my lips. No new taxes,” became the quote most associated with his presidency. But by 1991, he had broken that pledge and voters never forgave him for it. Two years later, Bush 41 was former President George H. W. Bush.
As Donald Trump ran for office, he pledged to cut taxes across the board. Tax cuts for poor and middle class Americans were the promises he made. The new plan the House Republican leadership has unveiled promises to cut taxes. But the devil is in the details and these details could come back to bite the GOP.
How could tax cuts come back to bite the Republicans?
Tax cuts are not any good if they do not actually put more money in the pockets of the real Americans who are supposed to benefit from these tax cuts.
One of the biggest issues facing the Republican leadership is rewriting the tax code. And one of the proposals is to tax imports. One of the big changes the Republicans want to make is to change the current corporate tax code with something known as “border-adjustable, destination-based” tax. In other words, a corporation would pay taxes where it sells its goods, not where it is located. The end result of this is going to be the raising of retail prices to cover the additional $1.2 trillion this change is expected to raise for the government.
The problem with any form of tax is that corporations, contrary to the constant propaganda from the left, do not pay taxes. Taxes are just another part of overhead that retail corporations have to pay.
And how do they do that?
They raise prices.
And this is the problem for Republicans. The retailers are not happy with the idea that taxes could be raised on their products. One spokesman for the retail industry warned that the potential tax could be five times their current profit. Those retailers will have only one choice.
They will have to raise prices and the American consumer will pay more for those goods. Corporations don’t like to pay taxes. The shareholders of corporations don’t like taxes. They would rather see the money come back as a return on their investment, or spend it on other items, than send that money to Washington.
These corporations will not be silent on this issue. Just as the voters blamed George H.W. Bush in 1992, if Republicans are not careful, voters will see higher prices and the GOP will get the blame in 2018 or 2020.
Consumer goods are not the only area that could see an increase in prices if tax reform is not done right. Under the current plan being offered by the House of Representatives, one economist predicts the price of gas could go up by $.30 a gallon.
The Republican Party has its best and perhaps last opportunity to prove it is the party of small government. Reforming the tax code is a huge goal and it is a goal that should be pursued with vigor. But in doing so, the GOP needs to do two things. First, it needs to shrink government significantly. The smaller government is, the less it needs in taxes. The second thing it needs to do is to reform taxes but do it in a way that puts more, not less, money into the pockets of real Americans.
If the GOP doesn’t get this right, history has shown what will happen to them.