Kudlow: How Trump and Congress can put health care behind them and get a 'W' with this

Kudlow: How Trump and Congress can put health care behind them and get a 'W' with this
Kudlow: How Trump and Congress can put health care behind them and get a 'W' with this

Yes, we desperately need personal tax simplification. We also need lower tax rates across-the-board. We need to clamp down on loopholes and unnecessary crony-capitalist deductions to broaden the tax base. Yet that's a much more difficult and longer battle. Save it for next year.

There are hundreds of tax lawyers in Washington who can separate business income from personal income. That will allow legislation to reduce tax rates for the small "S-Corp" companies, as well as limited-liability partnerships and proprietorships.

So let's end the war on business. Let's reward, rather than punish, success. Congress need only go for a 10 percent repatriation rate, a 15 to 20 percent tax rate for large and small businesses, and immediate expensing for new investments.

Perhaps to draw in some Democrats, legislators can use part of the roughly $200 billion in repatriation revenues to provide an equity base for a privately owned and run infrastructure fund.

No new Fannie Mae or Freddie Mac. No government directors. Keep it all in the private sector.

Meanwhile, Congress and Trump should forget the crazy border-adjustment tax (BAT). It would badly damage consumers and the economy when what we need is faster growth.

Meanwhile, don't obsess over various reconciliation rules: those can be whatever you want it to be. The so-called Byrd Rule, which stipulates deficit neutrality over the long run, has been broken many times over the past 30 years.

Maybe this time, the GOP will talk to the Senate parliamentarian; perhaps the president of the Senate, Vice President Mike Pence, can overrule the parliamentarian.

With lower business tax rates and more net business investment to grow the capital stock, the economy is capable of growing over 3 percent yearly. And that 1 percentage point increase from the 2 percent baseline would yield, according to the Congressional Budget Office (CBO) – more than $3 trillion in deficit reduction over the next ten years.

The misbegotten BAT, and its phony $1 trillion pay-for, can be buried in a deep gravesite inside a large crypt.

Perhaps the major selling point for business tax cuts is the fact that the biggest beneficiaries are middle-income wage earners – not so-called rich people and rich corporations.

Importantly, the best research on this has been done by Kevin Hassett of American Enterprise Institute (AEI), and in recent years supported by a number of papers.

Ironically, Hassett is slated to be chairman of the president's Council of Economic Advisors, as soon as his vetting process is complete. No one makes the case better than Hassett that business tax cuts are in fact a middle-class tax cut.

So, with the postponement of health-care reform, we now have more than four months before the August recess to give the country the fuel injection it needs: A boost for wage earners, businesses, consumers, productivity and better jobs.

Put business tax cuts first. Right now.

Commentary by Larry Kudlow, a senior contributor at On Events and economics editor of the National Review. Follow him on Twitter @Larry_Kudlow.

CNBC

Get the latest news delivered to your inbox

Follow us on social media networks