It's time to dismiss the notion that comprehensive tax reform is in our immediate future.
And by comprehensive tax reform, I mean the lowering of rates; the elimination of tax loopholes, both personal and corporate; a territorial tax system for multinationals doing business overseas, and further tax incentives for individuals to save and invest.
It's not just that President Trump has been hobbled by a variety of self-inflicted wounds that will likely delay or destroy the chances of such a deal, but the internal divisions among the GOP may also simply kill reform in its ideological crib.
My CNBC colleague and friend, Larry Kudlow, lately has been calling for "skinny reform."
In other words, Kudlow is proposing to cut the corporate tax rate to 15%, offer U.S. corporations a one-time tax holiday on profits generated overseas and brought back to the U.S., and allow companies to immediately "expense" new investments in plant and equipment, as opposed to writing those investments off over time.
Here's the thing. Kudlow also acknowledges that economic growth is accelerating. If that's the case, it may be better to save the tax cuts for when they might be needed most — say during the next recession.
The Atlanta Federal Reserve, as Kudlow points out, just raised its third-quarter economic growth estimate to over 3.5 percent, from the 2.6 percent reported in the second quarter and the just over 1 percent reported in the first quarter.
And here's another thing or two. The St. Louis Federal Reserve says after-tax corporate profits are running at a $1.8 trillion annual rate thus far this year. Meantime, corporations paid taxes at a $400 billion annual rate, as of July 28. (Don't tell anyone, but that's an effective rate of about 18 percent.)
Individuals, by contrast, are paying taxes at a nearly $1.6 trillion rate.
And that doesn't count payroll taxes paid to fund Social Security and Medicare.
U.S. corporations have spent several trillion dollars over the last five years raising dividends and buying back stock. S&P reports that companies are also sitting on record amounts of cash, but are choosing not to do anything with it, at least for the moment. A tax cut would likely reinvigorate buybacks and dividend hikes.
And while the cash is good for shareholders, it fails to benefit the middle class that President Trump promised to help.
Add to that fact that even with an unemployment rate at a decade low of 4.3 percent, there are 6.2 million open jobs in the U.S. — a record. There's no shortage of jobs. We have a shortage of workers, both skilled and unskilled.
We don't need lower taxes to generate even lower unemployment. We need a growing population (read: comprehensive immigration reform and fewer barriers to enter the U.S.) and increasing productivity for the economy to reach its fullest employment potential.
Further, we need vocational training for home-grown semi-skilled individuals to work in jobs as welders or field workers in the energy patch, and we need advanced community college education to fill gaps in nursing, health care and other service-sector jobs.
We need more college graduates to become teachers, now in increasingly short supply, and highly educated workers to enter advanced manufacturing and technology jobs that are left wanting.
Overhauling the nation's insanely complex tax code remains a good idea, assuming it accomplishes the goals of comprehensive reform: simplification, lower rates and a broader base of taxpaying individuals and corporations.
A "skinny package" will simply needlessly reduce the share of taxes paid by big corporations, already at the lowest level in decades, and further encourage companies to buy back more stock and raise their dividends. The excess capital is unlikely to find more productive uses.
Taxes are not what ails the U.S. economy. Nor is insufficient demand from consumers.
We have other problems restraining growth and investment, not the least of which is subpar productivity growth. Tax cuts won't fix that, but other investments might.
Simply cutting taxes could be a relatively easy, feel-good fix. But it won't help the economy in the long run, nor will it deliver benefits to those who need them most.
The timetable for even a simple tax cut is likely pushed off until next year. In the meantime, the show will go on, and the ending will remain a cliffhanger.