Tax reform offers a chance for Republicans to accomplish several objectives at once: promoting economic growth, providing middle-class tax relief, simplifying the tax code, and — rising in importance — showing that they are capable of getting something done.
They now have a “framework” for legislation. It includes many useful and productive steps, especially in the area of business taxation, where it makes the U.S. a more attractive place to invest for Americans and foreigners alike.
As they move from the framework to an actual bill, though, Republicans will have to contend with four political problems, some of which are also substantive problems. These issues largely arise from changes to the tax code for individuals. The Republican bill could fail to cut middle-class taxes, or it might even raise them for many families. It could alienate too many blue-state Republicans to pass. It could increase the deficit enormously. And it could cut taxes for the rich too much.
It may be possible to overcome these obstacles while keeping the framework — but not without paying a price.
The political problem Republican legislators need to fix most urgently is that their outline leaves the impact of tax reform on middle-class families unclear. It commits to a big expansion of the standard deduction, which would be $12,000 for singles and $24,000 for families. It endorses a “significant” increase in the child credit. But it also abolishes the personal exemptions and raises the tax on the first $9,300 of taxable income from 10 to 12 percent.
The net effect of this change depends on how…