McCain Torpedoes Repeal of Obamacare: Is Tax Reform Next?

Right From the Start

If you are looking for the person primarily responsible for the failure of the Senate Republicans to repeal and replace Obamacare, look no further than that perpetual pain-in-the-ass Sen. John McCain (R-AZ) who cast the deciding vote to ensure its defeat. You might wonder why Mr. McCain would rise from his hospital bed after serious brain surgery, travel nearly 2400 miles from Phoenix, AZ to Washington, DC to cast the deciding procedural vote to ensure consideration of the repeal and then cast the deciding vote to ensure its defeat? Is it because Mr. McCain is a great American imbued with an urgency to heal the political wounds of the past two decades of bitter partisanship? While Mr. McCain is undeniably a former war hero, he is hardly a great American and he has done as much to exacerbate political discord as any member of Congress,

The answer, as usual, can be found in the New York Times by reading their articles and assuming that the truth is exactly the opposite. On Friday, July 25, the New York Times headlined its front-page story thusly:

“McCain Returns to Cast Vote to Help the President Who Derided Him”

The truth is more probably that “McCain Returns to Cast Vote to Embarrass President Who Derided Him.” Had Mr. McCain not cast the critical vote to allow the repeal of Obamacare to advance to debate, the matter would have remained in limbo and the Republicans would have been tasked to find a compromise that could have delivered that extra one crucial vote from either Sen. Susan Collins (R-Me) or Sen. Shelly Capito (R-WV) or possibly Sen. Joe Mancin (D-WV) or Sen. Heidi Heitcamp (D-ND). No, the only way to kill the repeal was to make sure it came to a vote and then cast the decisive vote to kill the attempt. Mr. McCain did not have an alternative solution that he preferred. He did not support any of the solutions proffered by other Republicans. No, he was simply against any solution that would have permitted President Donald Trump and his fellow Republicans to fulfill a campaign pledge. How perverse is that?

The truth is also probably contained in the opening lines of Mr. McCain’s speech to the Senate upon returning from his surgery for brain cancer:

“Mr. President:
“I’ve stood in this place many times and addressed as president many presiding officers. I have been so addressed when I have sat in that chair, as close as I will ever be to a presidency.” (Emphasis supplied)

Mr. McCain hates President Donald Trump. Even more than he hated President George W. Bush who defeated him decisively in the Republican presidential primaries of 2000. Mr. McCain then spent eight years stabbing Mr. Bush in the back at every chance he had – usually in front of the television cameras. He may have good reason to hate Mr. Trump but he had no reason to hate Mr. Bush. It doesn’t matter. Both men aspired to and won the prize that Mr. McCain sought for himself. The fact that they were elected President and that he was not was sufficient. And it was probably more painfully felt by Mr. McCain who lost a race against a virtually unknown junior Senator from Illinois with a sketchy background populated with dope smoking, radical clerics and former domestic terrorists. The fact the voters preferred Mr. Bush and former President Barack Obama over him must have irritated the hell out of him. And then to have a brash, loudmouth from New York with no political experience who derided his sacrifices during the Viet Nam War and then beat the presumptive establishment favorite Hillary Clinton was more than the self-proclaimed “maverick” could bear. How could Donald Trump be elected president and not him? Will wonders never cease?

Fine. I get all of that but we elect our public officials to represent the voters’ will, not to exorcise their own personal demons or visit their revenge on their enemies. The voters of Arizona overwhelming supported the repeal and replacement of Obamacare. But that doesn’t matter to Mr. McCain because this, like everything else he has done over the last three decades, is about him – not them.

The Republican leaders have now said that they will pivot to tax reform. I do not know why they think they will have a different result with tax reform than they have had with the repeal of Obamacare. There are a whole number of issues that divide the congressional Republicans and there does not appear to be any willingness on their part to find common ground. Among those issues are whether any tax reform package is revenue neutral, whether the purpose of tax reform is to promote economic growth or to reduce and simplify taxes for the middle class and whether to eliminate or reduce current death taxes and capital gains taxes.

Too much time has passed since the election. The ideologues, the lobbyists, and the protectors of the status quo have had time to “dig in.” The momentum for change has been buried by an avalanche of false accusations about Mr. Trump collaborating with the Russians, about Mr. Trump trying to deny health insurance coverage to millions, about Mr. Trump favoring the rich at the expense of the middle class, about the size of Mr. Trump’s hands (penis) and about a whole lot of other nonsense. And while Mr. Trump does not appear to have lost any of his energy and zeal for the fight, it is obvious that the Congress has returned to its old habits of doing nothing and blaming others.

Let me suggest an easy path through these problems. It is a difficult path for Republicans because it focuses on the middle class, ignores the wealthy, simplifies the tax codes, eliminates the special interest tax benefits and results in significant increases in capital available to stimulate growth and resulting job creation. It also has the ancillary benefit of reversing the trend of social policy masquerading as  tax policy. In addition it rankles Democrats to no end because they have never found a tax that can be reduced or a spending program than shouldn’t be increased. Here are the elements:

1. A substantial reduction in the corporate tax rate and an extension of that tax rate to Sub-chapter S corporations and “pass-through” business entities. That tax rate would be applied to gross revenues reduced by cost of goods sold and an accelerated depreciation schedule. All other special purpose tax breaks, including tax breaks for oil and gas companies, alternative energy providers, and hedge fund managers would be eliminated. My target would be twenty percent.
2. A substantial reduction in the individual income tax rate for individuals earning less than $250,000 or households earning less than $500,000. The income level would be indexed and adjusted annually. That level represents over ninety-five percent of all taxpayers and defines the middle class. (Roughly fifty percent of all people pay no federal income tax. Those who argue that such reductions do not provide any significant stimulation of investment capital are correct; however, that stimulation is already provided by reducing the taxes on business at referenced above. Accompanying the reduction in these tax rates would be the elimination of itemized deductions but a doubling of the rate for standard deductions.
3. There would be no tax reduction for those earning in excess of $500,000. However, it might well be appropriate to earmark a percentage of those taxes for deficit reduction.
4. Income earned outside the country by companies and persons subject to tax in America will be taxed in the same fashion as if it were earned domestically reduced by the amount of taxes imposed and paid where it was actually earned. In doing so you avoid creating an incentive to invest and earn elsewhere while at the same time eliminating any punishment for repatriation of income. Income currently being held overseas would be repatriated using the same formula.
5. Pre-empt the states with regard to death taxes and capital gains. Then eliminate the death tax and reduce the capital gains tax to ten percent.

That’s it – pure and simple. A tax break for the middle class, a tax simplification that reduces a tax return to one page, a stimulation for both “C” and “S” corporations (and pass-through business entities) that will stimulate growth and job creation, and a complete disregard of the very wealthy.

The likelihood of anything like this getting done is low given the mindless resistance of the Democrats and the entrenched deference of the Republican elites to their traditional allies – apparently nobody has told them that the rich have been supporting the Democrats for decades. And even if the Republicans can work their way through these issues, there is still John McCain standing in the wings waiting to stab Mr. Trump and his fellow Republicans in the back – waiting to deny them any successes. I do not wish Mr. McCain ill in his pending fight with cancer. In fact I hope that he can successfully recover. However, if Mr. McCain is half the patriot he claims to be, he would leave behind his anger and his vengeance, retire gracefully to enjoy his remaining years and allow Gov. Doug Ducey (R-AZ) to appoint his successor.