The solution is to reduce the corporate rate and adopt a territorial tax system, taxing only profits earned at home, as almost all other Western countries do. The good news is that the House plan does both these things. The bad news is that the proposal is weighed down by the border-adjustment tax. Republicans should drop this controversial provision and focus on the policies that will boost growth.
To get the maximum bang for the buck, the final package should include restraints on spending—which doesn’t even mean an absolute budget cut. If Congress simply limits the growth of outlays to about 2% a year, that would create enough fiscal space to balance the budget over 10 years and adopt a $3 trillion tax cut. If Republicans want a win-win, dropping the border-adjustment tax is the way to get one.
Yet history shows that free exchange is constantly at risk of being infected and captured by parasites and predators who live off productive people through taxes, tithes, rents, slavery, subsidy, war and theft. This is what killed the goose in ancient Greece and Rome, in Renaissance Italy and Holland’s golden age.