So Hugh Hewitt has a plan to pay for tax reform, but…
Just yesterday I was questioning how (or more frighteningly, if) the GOP planned to “pay for” the tax reform package currently under discussion. One thing to avoid, as I attempted to stress, is the danger of producing a result such as we saw in Kansas, where significant and laudable tax cuts were completely undone by a failure to cut spending and keep the economic scales in balance. So if that’s the challenge in front of us, how do we “pay for” these proposed tax cuts on the national level? (As an aside, I really hate the term “pay for tax cuts” but that’s a gripe for another day.)
Nationally syndicated, conservative radio host and author Hugh Hewitt has some ideas and they were published this week in the Washington Post. For full disclosure up front, Hugh is one of the leading figures in the Salem Radio Network, part of the parent company which owns Hot Air. Also, I’ve had the pleasure and fortune of meeting Hugh a few times and regularly engage with him on social media. He is, in my opinion, one of the smartest people in political journalism and it’s no surprise that he was chosen to grill candidates during the 2016 presidential election. His interviews with such hopefuls are always hard-hitting, but fair, demanding in-depth knowledge of the issues.
I have, on more than one occasion, said that challenging Hugh on political matters is generally a fool’s errand, so it’s with considerable trepidation that I find myself taking issue with at least some of the proposals he’s putting forward here. He begins with the premise that new sources of revenue will have to be found to pull off this feat. I don’t completely disagree because, as I’ve debated with Ed Morrissey here in the past, I don’t believe that spending problems and revenue problems are mutually exclusive. You can indeed suffer from both. But Hugh spends far more time on the revenue question than the spending issue.
Along those lines, Hewitt offers three new sources of revenue, along with some longer range plans to be incorporated later. The first is to eliminate the Obamacare individual mandate. It’s always nice to start off a debate with a position of agreement so I’m pleased to say that I remain 100% onboard with this idea. I’m not sure I completely buy the theory that it will save the government up to $400B over the next decade, but so be it. If it does, great. If it doesn’t, the mandate was a horrible idea which needs to go anyway.
Next, Hugh veers off into some decidedly more controversial territory. I’ll let him explain it himself. (Emphasis added)
Second, raise the gas tax. The obvious connection between the gas tax and its uses makes this the most palatable of old revenue sources to increase, especially as the prospect of new infrastructure spending looms. Serious students of federalism know the GOP has always been in favor of “internal improvements,” as infrastructure was known in Lincoln’s time. Finding the money should begin with a significant hike in the fees charged motorists using the most ubiquitous of infrastructure: the roads.
I’m not going to reject this idea entirely without giving it a fair shake, but I’ll just say that my initial response to any tax hike just as we’re supposed to be cutting taxes is lukewarm at best. The idea of placing the burden on commuters who use those roads to get back and forth to work or for the occasional vacation if they can afford it rankles. And focusing the revenue search on America’s oil and gas industry just as we’ve reached a point of global dominance in that sector sickens me.
But with all that said, perhaps a targeted, moderate increase could be considered, but only within limits. I understand that saying we’re taxing people “for a specific purpose” (such as infrastructure) is specious because money is fungible and most tax revenue goes into the general fund. But we might examine just how much the proposed infrastructure projects would cost (and only real infrastructure costs, not grab-bag money handed out to the states which winds up going to plug holes in their budgets and prop up pet causes). Tell us how much gas tax money is currently coming in and how much more we would need for these programs. Then perhaps we could consider a targeted gas tax increase which only lasts long enough to cover that bill and then is automatically repealed. What we don’t want is an excuse for a higher federal gas tax which lasts in perpetuity and gives Washington an excuse to dream up new ways to spend it.
Third, Hugh suggests a 5% surcharge on every residential delivery of purchased goods. This has to do with our growing online sales economy and the impact it has on our infrastructure. Again, I’ll allow him to explain it.
A 5 percent delivery fee, collected by the merchant making the sale, would not be nearly as regressive as a broad sales tax (and may even be progressive). It would certainly tap into a volcano of revenue flowing into new-economy companies that have used the existing infrastructure of roads, rails and airports to build vast fortunes.
Such a delivery fee would be similar to fees assessed on airline and train tickets. It would actually be a “new economy user fee.” That’s got to have bipartisan appeal, while brick-and-mortar establishments would cheer any small tax-code recognition that the sales taxes their customers have paid for decades provided much of the infrastructure now being used to disrupt, if not completely destroy, them.
This sounds suspiciously like a back-door approach to something akin to the Marketplace Fairness Act. (Which has gone absolutely nowhere in Washington.) One can see the argument Hugh is making because brick and mortar businesses have absolutely been injured by competition from e-retailers who don’t apply a tax to their offerings. Also, I suppose one could argue that there are more UPS trucks on the road these days delivering all those packages, but I suspect a thorough study would show the impact isn’t quite as overwhelming as such a tax would suggest. Honestly, this sounds more like a new national sales tax in disguise and I can’t see supporting it. If you want all online sales to be taxed, just propose taxing them and see if there’s support for it.
The final straw dumped on the back of this particular camel comes with Hugh’s longer range plans for revenue. Since my jaw is currently impairing my ability to type because it’s on my keyboard, I’ll paste this one in from Hugh’s column as well.
There’s also a case to be made for a new income-tax bracket for the very, very wealthy and a tax on very, very large estates, in this Citizens United era where billionaire self-funding is becoming a new political force on both left and right, one unanticipated by the Founding Fathers. Starting that discussion makes sense, but figuring out the correct rates and thresholds cannot be jammed into the time available.
This apparently was not a typo. Hugh Hewitt is suggesting that the current, highest tax bracket… the one which the proposed GOP plan fails to lower… should be augmented with one that’s even higher? The top rate is already nearly 40%. Are we suggesting that the penalty for success in this country should approach the fifty percent mark, with half of all your earnings going to Uncle Sam because “you made too much?”
That was followed by the even more haunting phrase, “a tax on very, very large estates.” So that would be… a larger estate tax? Please correct me if I’m wrong, but you’re talking about an even larger death tax rather than eliminating the death tax entirely?
Sorry, Hugh. You’re one of the people I admire most in this business, but you just shoved me off the train entirely. Let’s strike that entire last paragraph from your proposal and instead talk about how we can cut spending in a significant way while still doing so in a package which can be passed into law. Yes, we have a revenue problem and it could be made worse by these proposed tax cuts as they currently stand. But we also still have a massive spending, waste, fraud and abuse problem. Let’s work together to clean out that closet before we start going the full Nancy Pelosi route and talking about further taxing those who have too much money.