Now that the repeal of the Affordable Care Act is dead—at least
temporarily—Republicans are moving on to the next big item on their
legislative agenda: taxes. For months, a group of Trump Administration
officials and top congressional Republicans, known as the Big Six, has
been working in private with the goal of developing a plan that the
White House, the House of Representatives, and the Senate could jointly
endorse. The result of that process, a plan called the “Unified
Framework for Fixing Our Broken Tax Code,” was finally released
yesterday.

The document proclaims, in bold, all-caps letters at the top, that the
plan is “TAX REFORM.” That’s not really the case, at least not in the
way that the term has been used for decades.

The original ambition of Republicans in Congress, as they have
repeatedly stated, was to rewrite the tax code along the lines of the
1986 Tax Reform Act, which was signed into law by President Ronald
Reagan. “This October will mark 30 years since President Ronald Reagan
signed into law the Tax Reform Act of 1986—landmark legislation that is
recognized as the single largest reform of the U.S. tax code in our
nation’s history,” the G.O.P.’s “Better Way”
plan,
which was the brainchild of House Speaker Paul Ryan, notes. “In many ways, our
current tax and political environment is remarkably similar to the one
that allowed President Reagan to successfully overhaul the tax code
three decades ago.”

The 1986 effort had one simple idea at its core: revenue neutrality.
Some taxes would be cut and some would be raised, but the over-all money
taken in by the federal government would remain the same. The idea was
to make the tax code fairer and more efficient, not to cut taxes for the
sake of cutting taxes. Every serious legislative effort in recent years
that proclaims to be “tax reform” has abided by this simple metric. Some
policymakers have argued that tax reform should also have
“distributional neutrality,” so that that no income group is better or
worse off after reform. But, at the very least, tax reform as a concept
with any meaning is about changing the code in a way that doesn’t add to
the national debt.

Ryan used to agree with this. His “Better Way” plan “envisions tax
reform that is revenue neutral.” But, even before Wednesday’s
announcement, Republicans signalled that they would not be able to
devise a tax-reform plan along the lines of the 1986 changes. To use the
process known as reconciliation, which prevents a filibuster in the
Senate, Republicans must first produce a budget that includes the broad
parameters of their rewrite of the tax code. In the Senate, they
recently agreed to a budget that included a tax cut that would add $1.5
trillion to the deficit. In other words, they replaced tax reform with
tax cuts.

Trump made this clear on Wednesday, after being introduced to a raucous
crowd at the Farm Bureau Building, in Indianapolis, Indiana. “Thank you
very much,” he said welcoming the crowd. “You just want massive tax
cuts. That’s what you want. That’s the only reason you’re going so
wild.” He occasionally tried to stay on message, mentioning tax reform
here and there, but he couldn’t help bragging about “the largest tax cut
in our county’s history.”

So what happened? The Big Six, which includes Ryan, Senate Majority
Leader Mitch McConnell, the chairmen of the two tax-writing committees
in Congress, Treasury Secretary Steven Mnuchin, and Trump’s chief
economic adviser, Gary Cohn, couldn’t agree on enough reforms to raise
revenue. Ryan had one idea, a so-called border-adjustment tax, which
would have raised a trillion dollars to offset some of the rate cuts in
the plan by taxing imports. But that was nixed by the White House and
never replaced with anything as ambitious. In the end, the Big Six also
couldn’t agree on as many details as the group originally proclaimed.
“We are all committed to having a bill that the six of us sign onto,” a
member of the group told me earlier this year. “There’s going to be one
tax bill and one tax bill only.” Wednesday’s nine-page plan, which had
lots of large type and empty space, is far short of a “bill.” Most of
the details will now be left up to the tax-writing committees, which,
from a process perspective, is a better way to legislate. Yet that still
falls short of what the Big Six promised.

Instead of doing the hard work of crafting a revenue-neutral tax reform,
which requires taking on powerful political constituencies and working
with Democrats, Republicans will fall back on arguing that the economic
effects of the tax legislation will be so powerful that it will pay for
itself with growth. Trump started to make this case during his speech in
Indiana, citing two historic tax cuts that are often used as evidence
that tax cuts have an almost magical power to turbocharge the economy.

Trump said that “Democrat President John F. Kennedy championed tax cuts
that surged the economy and massively reduced unemployment.” And he
pointed to “the tax strategy that Ronald Reagan used to create an
economic boom in the nineteen-eighties, when our economy took off, the
middle class thrived, and the family income of all families was
increasing more and more,” adding that “it was a beautiful sight to
behold.”

There are some problems with this history. Kennedy proposed cutting the
top tax rate from an astronomical ninety-one per cent to sixty-five
per cent—and, after Kennedy was assassinated, Lyndon Johnson did sign a
similar cut into law. In 1981, Reagan cut the top tax rate from seventy
per cent to fifty per cent. The top rate today is 39.6 per cent, and the
G.O.P. plan envisions bringing it down to thirty-five per cent, while
bringing the corporate rate of 38.9 per cent, which in reality very
few corporations actually
pay,
to twenty per cent. Tax rates in 2017 are nothing like they were in the
sixties or the eighties, and there is no evidence for the outlandish
claims being put forward that a few points’ reduction in rates will pay
for all the revenue that is lost.

But even Reagan’s large rate cuts didn’t produce the kind of growth that
Republicans now claim they did. Reagan may have cut taxes, but then he
signed into law numerous tax increases over the next eight years that
clawed back half the revenue lost from the large 1981 cut. As Bruce
Bartlett, the former Reagan adviser turned fierce critic of the G.O.P.,
noted yesterday in testimony, Reagan’s defense buildup—a classic
Keynesian stimulus—and the Federal Reserve’s steep interest rate cuts
had far more to do with bolstering the post-1981 economy than the
original tax cuts ever did.

Reagan passed his 1981 cuts relatively quickly and easily, but the 1986
tax-reform bill was the work of almost three years of difficult
bipartisan negotiations. That’s the real lesson of the eighties: tax
reform is hard; tax cuts are easy. That’s why Trump has ditched
the former for the latter.