Editorial: Filing a flight plan for tax fairness, jobs, growth

By The Herald Editorial Board

On the same floor where Boeing’s Everett workers assemble its jetliners, U.S. House Speaker Paul Ryan talked with the workers Thursday about what he’s been working on: an overhaul of the federal tax system, both for individuals and corporations.

Ryan, who plugged his home state of Wisconsin’s products from Miller Brewing and Harley-Davidson, seemed genuinely impressed following a tour of Boeing’s 767, 777 and 787 production lines.

“I have never seen anything like this in my entire life. This is really, really cool,” he told about 80 Boeing workers during a “town hall” meeting with the House Republican leader and Boeing CEO Dennis Muilenberg.

The Boeing backdrop was intentional, meant to help make the point behind the purposes of tax reform, Ryan said, leveling the field for manufacturers who face higher tax rates than their foreign competitors and simplifying the tax code for individuals and families.

Legislation still is being drafted in the House and Senate, but the House plan Ryan discussed in this and similar U.S. factory tours seeks to:

Lower the corporate tax rate paid by Boeing, Miller, Harley-Davidson and others, to 20 percent for its current 35 percent rate;

Reduce the number of tax brackets for individual taxpayers from the current seven — which range from 10 percent for low-income earners to 39.6 percent for the highest paid — to three: 12 percent, 25 percent and 33 percent; and

Increase the standard deduction for individual taxpayers, while eliminating most of the deductions that complicate the tax code, so that most individual taxpayers would be able to fill out no more than a postcard-sized tax return each year. Some deductions would be kept, Ryan said, specifically for home mortgages, donations to charity and retirement savings for individuals and families; and reinvestment in business for corporations.

Beyond simplifying taxes, the goal, Ryan explained, is to boost the nation’s annual economic output — which has been between 1 percent and 2 percent — to 3 percent annual growth, which would generate more jobs and higher pay for Americans.

But tax legislation, like the Boeing 787-9 parked behind Ryan on Thursday, is a complicated piece of machinery, as Boeing employees made clear during a Q-and-A session with Ryan and Muilenberg.

Among a number of solid questions from workers, Boeing employee Krupal Desai asked Ryan how Congress, once it had simplified the tax code, would keep future changes from complicating it again, which he likened to shampoo instructions, “lather, rinse, repeat.” Another worker asked how Congress would assure that tax savings won by corporations would be reinvested in companies and their employees, rather than going to the benefit of shareholders.

Ryan had no detailed response on either question, which points to the difficulty in overhauling a tax system that hasn’t seen significant change since the Reagan administration in 1986.

Incentives — as Washington state demonstrated with the tax breaks it delivered in return for Boeing bringing the 787 to Everett, followed by the 777-X — can be effective policy for lawmakers, whether they’re attempting to influence business decisions or encourage home ownership.

Ryan predicted Republicans would be able to get tax reform legislation passed and signed by the president in time for taxpayers to have their tax-return postcards by next year.

It may not be that simple.

Republicans, of course, control both House and Senate, as well as the Oval Office. Yet, while the House Republican tax plan shares similarities to President Trump’s tax proposal, Trump has put himself at odds with Republican leadership, in particular Ryan and Senate Majority Leader Mitch McConnell. Trump blasted both in a tweet the morning of Ryan’s Boeing visit, because neither had sought to attach an increase of the debt ceiling as a rider to Veterans Administration reforms.

Ryan, with relative ease, can move legislation out of the House. But the Senate will be a different matter. In order to meet requirements for approval by a simple majority, avoiding Democratic opposition, the tax overhaul will have to be shown to be revenue neutral. Analysis by at least two nonpartisan foundations, the Tax Policy Center and the Committee for a Responsible Federal Budget, say both the House plan and Trump’s will result in a net loss of revenue, which may cost the proposals support among Congress’ deficit hawks.

To be successful, what Ryan and other Republicans who want to reform the tax system need is what worked to win passage in 1986: a bipartisan effort.

Ryan was accompanied at Boeing by fellow Republican Rep. Dan Newhouse, from the state’s 4th Congressional District. But Ryan extended no invitations to Democrats, specifically Rep. Rick Larsen, whose’s 2nd District is home to Everett’s Boeing plant, nor 1st District Rep. Suzan DelBene, who sits on the Ways and Means Committee, which specifically deals with taxes and the budget.

DelBene, in a statement prior to Ryan’s visit, applauded the speaker for raising the issue and coming to Everett, but urged him to work with Democrats in the House.

“If he wants to accomplish something that has a real, lasting impact on families and businesses across the country, he should reach across the aisle and allow this to be a collaborative, open process that puts families, not politics, first,” DelBene said.

Among the tax reforms that might help to make Ryan’s proposal revenue-neutral would be a carbon tax and a tax on goods purchased on the internet, both of which have bipartisan support.

Working with Democrats could also increase the fairness of the proposal, particularly for lower-income and middle-income families. As proposed, the House Republican plan provides the greatest tax relief to the top fifth of income earners, especially so for the top 1 percent and top 10th of 1 percent, according to the Tax Policy Center.

The destination — a fairer, simpler tax code and a better climate for business and jobs — is set. What we need is the right plane to get us there.

Correction: An earlier version of this editorial misidentified the Congressional districts for Reps. Rick Larsen and Suzan DelBene. Larsen represents the 2nd District; DelBene the 1st.