Who’d a thunk it? Politicians whose constituents get hit by one of the main “payfors” in the Republicans’ tax plan are strongly objecting to that part of the plan. I’m talking about the elimination of taxpayers’ ability to deduct state and local taxes (SALT) from federal liabilities, a change that would offset $1.3 trillion of the cost of their proposal. According to Tax Policy Center numbers, losing this offset would raise the revenue loss of the bill from $2.4 trillion to $3.7 trillion. The idea behind the SALT-free tax code was to whack blue states that collect significant revenue. Republican tax writers believed, correctly, I suspect, that states and localities would have a much harder time sustaining their tax base without the federal write-off. As was easily predicted, however, Republicans from those states objected, and it now appears that Republican tax writers are considering losing the payfor. That means they’re going to need other payfors, and good news, Rs: I’m here to help! Here is a list, with rough numbers, of ways to raise revenue. But first, note that these ideas all make the tax code more progressive, so they help fix the two main flaws in your plan, which are significantly raising inequality and losing gobs of revenue. Second, you won’t love these ideas, but jerk not your knees and give them a listen. Third, Democrats, pay attention. These are some of the components of real tax reform – as opposed to tax cuts, which is what we’re talking about today – defined as a plan that raises the revenue we need while pushing back on market-driven inequalities. Cap all deductions: Of all the ideas that follow, this may be the only one with any hope of appealing to the unknown but probably tiny number of Rs who actually care about deficits and debt. Don’t try to pick off a politically motivated payfor like SALT, which, as you see, simply angers its beneficiaries. Instead, allow everyone above a certain income level – say the top 10 percent – to keep their itemized deductions but at a lower rate. Instead of taking deductions at their top income tax rate, which is now about 40 percent, they’d take them at, for example, 25 percent. Not only does this reform raise serious revenue – around $700 billion over 10 years – but since a lot of these deductions subsidize activities that wealthy households would do anyway (retirement savings, home-buying, sending kids to college), reducing them boosts efficiency in the tax code. Of course, now you’ve angered all the lobbyists, but at least no one’s getting singled out. “Stop coddling the super-rich!” That was the name of a Warren Buffett op-ed from a few years ago, and while I know this is a heavier lift for Rs – “coddling the rich” is analogous to assuaging the donors – it makes no sense to waste revenue loss on the one group that’s consistently been crushing it for decades. New data from the Federal Reserve reveals that over the past few decades, the share of wealth going to the bottom 90 percent is down about 10 percentage points while that going to the top 1 percent is up by almost that same amount. Given that reality, why kill the estate tax? It hits only the richest top 0.2 percent of estates and squanders $240 billion over 10 years for no known growth effects (the estate tax was temporarily eliminated in the 2001 tax cut, and analysts found zip in terms of growth impacts). In fact, you should take the next step and end “step-up” basis, a provision that allows heirs to avoid capital gains taxes on inherited wealth. That would also bring in north of $200 billion over 10 years. I’d make the same argument for the big, proposed cut on high-end pass-through income, which only helps the richest 14 percent of such businesses. A tax on carbon: I know, the Rs aren’t exactly looking for new taxes, but this idea has currency in mainstream Republican circles. It could take the form of a higher federal gas tax, which has been stuck at 18 cents since 1993 as it’s not indexed to inflation. Meanwhile, the costs of highway and transit maintenance have gone up as has vehicle mileage, which is why the highway infrastructure trust fund is always broke. One plan to raise the gas tax by 12 cents a gallon over two years and then index it to inflation would raise around $200 billion over a decade. A tiny tax on financial transactions: Okay, now I’m really just talking to Democrats, but a tiny, few-hundredths of a percent tax on security trades would both dampen wasteful noise (i.e., high-frequency) trading and raise a few hundred billion over 10 years. It would also raise money from a sector that arguably does not contribute enough to the government that bailed it out back in 2008. Traders claim that higher transaction costs will dampen market liquidity. Maybe a little, though a dime on a $1,000 trade is unlikely to have much impact. But as I recently wrote on this point: “Today’s financial markets are afflicted by too many high-frequency trades that have nothing to do with efficient capital allocation and everything to do with nanosecond price arbitrage.” Published in Daily Times, October 9th 2017.