How Republicans can win the White House

Low growth, low wages and persistently high long-term unemployment have led tens of millions of Americans to lose confidence that Washington – or anyone – can do anything about it.  A complicated, burdensome, loophole-laden tax system, which does little to foster economic growth, demands reform.  A smart Republican running for President will see the link between the two problems and make pro-growth, economic reform the centerpiece of his presidential campaign.

On one level, the Republican task is simple.  Focus on the economy – it’s leaving millions of people behind.

On another level, what exactly can be done?

Add one more dimension – what can be done that causes new people to vote Republican for President?  The Republican image with people who struggle to makes ends meet needs repair.  Too many low- and middle-income Americans believe Republicans don’t care about them.  After all, the GOP has lost the popular vote in five of the last six presidential elections.

If I were advising the presidential contenders (I’m neutral and enjoying the race), I would tell them to create a new Economic Growth Tax Code that does something no one is talking about - abolish all payroll taxes.

If I were advising the presidential contenders (I’m neutral and enjoying the race), I would tell them to create a new Economic Growth Tax Code that does something no one is talking about - abolish all payroll taxes.  The new code should also eliminate every loophole and deduction possible, while lowering rates.  Three parts to a new tax code.  All three aimed at economic growth.

Step one is the complete and total elimination of the payroll tax.  The notion of dedicated payroll taxes that fund Social Security and Medicare is quaint and false.  The payroll tax was supposed to work that way, but like many things in Washington, it became a phony promise.  The trust funds are routinely used to pay for other programs, and for decades general revenue dollars have paid Medicare’s bills.  There is nothing “dedicated” about either fund.  Instead, the payroll tax and the income tax slosh together into one big spending pot.

For tens of millions of low-income workers, the payroll tax is their biggest tax burden.  Eliminating it would be a powerful Republican message to low-income workers that the GOP is on their side.

But since payroll taxes do fund a portion of Social Security and Medicare, the revenue needs to be replaced.  And from a moral point of view, no one should receive a benefit for free and everyone should pay something to fund our government.  That means everyone, including low-income Americans, should pay income taxes.  Under this plan, low income Americans would no longer be subject to the regressive payroll tax.  Instead, like all Americans, they would pay into the progressive income tax.

In order to set the income tax rate at the lowest level possible, credits and deductions need to be eliminated.

Right now, there is a deduction or a credit for almost every activity known to man - paying alimony, foreign taxes and moving expenses, or installing solar panels, to name just a few.  In addition, there are deductions for housing, charity, healthcare, education and child raising. Politicians for decades have jammed government spending into the tax code in an effort to look like tax cutters.

The purpose of the tax code should be to raise the money necessary to pay the government’s bills.  It shouldn’t be the place to hand out benefits to those who qualify.  That’s what government spending is for.  If a program has merit, spend money on it.  If it doesn’t, it shouldn’t be hidden as a “tax cut” in the tax code.

Imagine a Congress in which debates about new programs were truly debates about whether – or not – taxpayer money should be spent.  I suspect an approach like that would lead to less government spending.

The tax code today has so many sacred cows that reformers fear they’ll get stampeded if they try.  Maybe that’s one reason people have lost faith in Washington.  Too often the national interest, in this instance economic growth for all - has become subservient to those who like the tax code the way it is. But presidential races are about leadership.  America is yearning for someone to put the country first, providing an opening to the presidential contender who seizes it.

There is no reason for the American people to accept that we have become an economically sluggish nation, marked by 2% real GDP growth, resulting in an economy that is leaving behind tens of millions of people.  We have never accepted such a weak economy before and we shouldn’t now.

The winning Republican will be the one who galvanizes the nation around his or her plans for growth.  Just as Ronald Reagan’s policies ushered in an economic boom that turned Democrats into Republicans, the right Republican candidate has a chance to do the same.