We are now in the final battle as a movement to identify what conservatism will be in the 21st century and be able to turn this nation around. As I detailed in my book, America at the Abyss, Will America Survive, the future of conservatism is to combine Trump populism with Reagan conservatism. The battle is between the populist conservatives and more traditional conservatives. Dominic Pino detailed this recently, “For decades, tax cuts have been at the center of the conservative economic agenda. But some on the right want to deprioritize them in favor of other economic goals. Senators Marco Rubio, Josh Hawley, J. D. Vance, and others talk of the need for a new Republican economic agenda focused on things such as industrial policy or social policy. The Trump administration sought to increase tariffs, and conservative defenders of protectionism are being more vocal…Tax cuts seem to irk some right-wing commentators. In May 2020, writing for the American Conservative, Michael Cuenco bemoaned the Tax Cuts and Jobs Act (TCJA), the 2017 tax-cut law that Donald Trump signed, and called for a “reformulation of fiscal policy along populist economic nationalist lines.” He wrote, “The reformist right should ask: is there any way to stand athwart the supply-side swamp yelling Stop?”
I made the case that the importance of supply side economy and that its definition must be expanded. Government spending must be controlled, regulations burden reduced, and supply side had to move beyond just tax cuts. Trump did two of three, reduce regulation and tax reduction which benefited most Americans. The result was continuation of the recovery and more importantly the middle class and lower income saw their income increase. Economic growth matters but Trump failure to get government under control hurt his overall economic plan and the massive spending during the Covid pandemic combined with the anti-growth lockdown hurt the economy in 2020 and hurt Trump chances to win re-election.
Pino noted that GOP governors are pursuing tax reductions and yet, they are conscious of making sure that they keep spending under control as not repeat what Brownback did in Kansas, cut taxes but failed to cut spending accordingly. The new generation of governors are doing both while not just cutting taxes but trying to flatten taxes. It is as much of reforming the tax system as it is about cutting them.The United States is in the middle of the tax-reduction revolution on a state level and as Jared Walczak of Tax Foundation, observed, “The past three years have seen the largest wave of state-tax cuts in the modern era, certainly since income taxes were created over a century ago at the state level. We have seen more than half of the states with income taxes cut their top rates. We have seen trimming of rates in other taxes, including thirteen states with corporate-income-tax cuts, a couple of states with sales-tax cuts, and trimming other taxes as well.”
There are seven states that do not tax individual income including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. New Hampshire taxes only interest and dividends but are phasing them out so there will be eight states with no taxes on income. Governor Burgum of North Dakota noted recent legislation in reducing taxes will move North Dakota toward a goal of no state income tax and Iowa Kim Reynolds is following a similar path.
Mississippi Governor Tate Reeves attempted to be rid of the income tax, but the legislature chose a flat tax with reduction of rates. Tax Foundation Walczak favored the legislature caution as he noted, “Some proposals have overreached, but lawmakers have either defeated those proposals or substantially curtailed them before enacting them,”
When Kim Reynolds did her tax reforms, these principles were considered as government spending were slowed while lowering the tax rates. Iowa house speaker pro tempore John Wills observed about the Reynolds reform “We were looking at being very cautious and being very conservative, I guess you could say, in our approach, so that if at any point the revenues weren’t coming in as projected, we could back it off. That is why the cuts are designed to step up over several years.” The state replaced its top rates 8.53% and nine brackets to 6% and four brackets and the different brackets will be eliminated each year until the 3.9% flat tax is reached subject to revenue triggers. For many Midwestern Republicans do not want to copy is first Illinois and for many Iowan Republicans, they realized their top rates were higher than Illinois and that was a wake-up call to reform Iowa tax system. The second is to not copy the Kanas model for when Brownback signed huge tax cuts with the idea of boosting economic activity, but budgetary shortfalls occurred as tax revenues increases didn’t materialize, and budget shortfall occurs. This led to Democrat Laura Kelly to be elected in 2018 and re-elected in 2022. Republican politicians are taking a more caution approach and controlling government spending.
Which leads us to the future of the GOP as Republican governors are looking to control their budget and return money back to the taxpayers. As I mentioned in a previous piece, Florida has been providing essential services for one half the cost as Democratic states like New York and do not have a state income tax. For the GOP, the key will be combined the best of Reagan with the Trump populism which Trump did with his tax and regulatory plans. A modest foreign policy combined with tax and regulation reduction were the hall mark of the Trump years and the Republican candidate who can combine these two principles and add spending restriction can win the White House.
References
Where Tax Cuts Are Hot | National Review
Florida vs California – by Tom Donelson/ F of F (substack.com)
The Donelson Files 