Lean, Clean and Pro-Growth – A Model Tax Plan for the Next Generation of Government

Factory output is rising. Builders are ramping up spending on construction projects. Exports are increasing, leading to narrowing trade deficits. Housing starts are trending upwards. Retail sales are increasing. And Manufacturers’ and trade inventories are falling.

For the economists among us, all of those are signs that the economy is improving. And yet polls show that Americans are more pessimistic about the economy than they were immediately after the Great Recession was declared over. Indeed, a new Pew Research poll finds that only 22 percent of Americnas believe the economy will be better a year from now. How on earth can you square those two competing views?

“Two recent reports help explain the disconnect between the official jobs numbers and the economic experience of most Americans,” writes William Galston for the Wall Street Journal.

The first is a report from the U.S. Commerce Department that found household incomes have fallen since the beginning of the recession. In 2013, the median income was $51,939, which was 8 percent lower than it was the last year before the recession.

The second is a Census report showing that part of the income problem is that people are being forced to work fewer hours. According to the Bureau of Labor Statistics, the number of Americans who want full-time work, but are stuck in a part-time job has risen from 4.6 million to 7.2 million since 2007.

Using these figures Galston concludes:

The American economy hasn’t worked for average families since the end of the Clinton administration. A recovery that leaves them out is no recovery at all, and they know it. This simple fact goes a long way toward explaining the tone of our current politics and the temper of our society. It will not change for the better unless we can recreate an economy in which work is rewarded and family incomes rise. That is the great task of the next decade—and must be the prime focus of the next presidential election.

We would one-up Galston. There is no reason to wait another two years in hopes that we can elect a president who can focus on improving the economy rather than simply “pivoting” around it. We have that opportunity in November’s congressional elections.

The fix is simple. We must support and elect candidates that understand that our economy is stuck in neutral in part because Washington is stuck in the past. They are still trying to run our economy and our lives the old way: from the top down, politically and artificially from Washington. They still think that a few guys in D.C. can govern this new, wonderfully complex, incredibly fast, and elegantly diverse modern economy. They’re wrong.

Fortunately, Republicans are offering up candidates and ideas that understand the new world we live in. As Sens. Mike Lee and Marco Rubio write in the Wall Street Journal:

If we hope to realize a new American Century, many institutions and government programs will need to be updated, reformed or replaced. Both of us have spent a large portion of the year proposing such reforms.

Perhaps no function of the U.S. government is more antiquated and dysfunctional than its tax system, so we are joining together to propose a federal tax-reform plan that will remove obstacles to investment, innovation, growth and opportunity.

Their plan simplifies the antiquated structure by collapsing the individual income tax into two simple brackets; reforming the complex scheme of deductions, credits and exemptions; making the 35 percent corporate rate competitive in the global economy; and eliminating double taxation for investment.

This is a streamlined plan that focuses on the things that benefit all of us, like job growth and family creation, and reforms things that disproportionately benefit the privileged few, like the mortgage income deduction. In short, it’s a plan that encapsulates everything we should want for our next generation government: It’s lean, it’s clean, and it’s pro-growth.

With more ideas like that, perhaps we could get average Americans’ view of the economy on the same page as the economists.