In a rational political environment, there's a strong argument for tax reform—the next item on President Donald Trump's agenda. But we don't live in such an environment. So instead, let's use healthcare as a microcosm to explore why an incompetent White House and its enablers in Congress will be as unsuccessful at tax reform as they were at healthcare reform.
First, we must define tax reform. Another massive tax cut for wealthy individuals and companies is not tax reform. Cutting taxes when the economy is near full employment will do nothing more than blow a massive hole in the federal budget. That's a very bad idea given the ongoing retirement of 70 million baby boomers.
Real tax reform entails simplifying the tax code so it is fairer with fewer loopholes and has lower rates. Most importantly, it must be revenue-neutral or even increase the tax take so the government can meet its obligations over the next 30 years.
How much will we need? The Congressional Budget Office projects spending on Social Security and Medicare over the next three decades will drive federal spending to about 23% of GDP, up from 20% today. (In 2012, the projection was similar, which indicates the CBO continues to give short shrift to all efforts at healthcare cost control.)
Is that unmanageable? Among the 35 nations in the Organisation for Economic Co-operation and Development, the U.S. comes in fourth-to-last in the share of its economy taken in taxes. Thank goodness for Chile, South Korea and Mexico.