Issues with the Tax Bill
In the first major tax overhaul since the Reagan administration’s in 1986, Republican lawmakers claim that the new tax bill, the Tax Cuts and Jobs Act, would bring more jobs, create fairer taxes, and offer people bigger paychecks. While all of these sound like they would be wonderful additions to American society and its economy, in actuality the new tax bill would only benefit few in the long run.
One of the biggest issues of the current tax bill is that it would add a total of $1.5 trillion to the debt when looking at all parts of the tax bill. So why would Republican lawmakers and President Trump agree to make and endorse a bill that directly contradicts promises made to decrease the national debt? That is because of the idea that with lowered taxes people spend more money therefore increasing revenue. This increase of revenue should then offset the $300 billion that would be added to the national debt over the next eight years from the individual tax cuts specifically. This principle that was applied in the Reagan 1986 tax reforms would not work today. Unlike the years years before 1986 where the highest tax rate was 70%, today’s tax rates are below 50%, so the principle itself, which comes from the Laffer Curve, that so many Republican lawmakers have claimed will balance the increased debt would not work in our economy, and rather than increasing revenue, it would decrease revenue instead. The tax bill also offers much larger tax breaks to the wealthy in comparison to the lower and middle class. The GOP bill lowers the highest tax rate for the wealthy from 39.6% to 37% and also raises the threshold of this tax from $470,700 to $600,000 for married couples. Not only is this tax cut more drastic in comparison to the tax cuts applied to the lower and middle class brackets making it unfair under these circumstances, it also increase how much money must be earned to be considered “wealthy.” Middle class Americans would also begin to feel less of the effects of their tax cuts because, as Josh Barro from Business Insider writes, “ tax cuts for middle-income families are eroded over time through gimmicks related to inflation.” The individual tax cuts would also all fade out by 2025 unless extended, only adding more to the national debt.
The tax cut that solely benefits the wealthy is changes to the estate tax or “death tax” which taxes the property that is passed on from a deceased person. Previously Americans could pass on $5.5 million dollars tax-free and $11 million for couples, but in this new bill these thresholds would be $11 million for individuals and $22 million for couples. In earlier estimates, this would raise the national debt by $200 million. This portion of the bill only helps the wealthiest of the wealthy in America, and the only part of the bill that balances the increase of debt from this part of the bill is repealing the Individual Mandate from the Affordable Care Act. Although repealing the Individual Mandate would save the federal government $300 billion, the congressional Budget Office also estimates 13 million fewer Americans will have health insurance and an increase in premiums over the next ten years.
The tax bill will also decrease the tax on corporations from 34% to 15%. Republican lawmakers claim that with lowered corporate taxes more business will be willing to move plants to America, creating more jobs, raising wages, and generally growing the American economy, outweighing the $1 trillion that would be added to the deficit, but that is simply idealistic thinking that is not a guarantee. As stated during a PBS Newshour, when the corporate tax is lowered other countries could retaliate by lowering their own taxes to entice companies back to their country; although this is far fetched, it is still a possible consequence of the corporate tax cut. The more likely scenario is that rather than spending the money earned from tax cuts on creating new jobs and investing in American industry, business will simply give the money to their shareholders. Major companies such as Coca Cola Co., Cisco Systems Inc. and Pfizer Inc. have already stated that any revenue gained from the tax cuts would go to buying back shares. The corporate tax cut would also only raise about $100 a year in income. The Congressional joint Committee on Taxation- supported by other sources such as Moody’s, Tax Policy Center (TPC), and Penn Wharton Budget Model (PWBM)- found that on average there would only be a 0.7% increase in Gross Domestic Product (GDP) in the next ten years, which would not be sufficient to balance the $1.5 trillion accumulated by this bill towards the debt, ultimately leaving $1 trillion to the deficit. So in total, although the tax cuts may seem like a brilliant idea, the long term consequences of the bill include $1 trillion added to the national debt without a sufficient way to offset the increase, as well as tax cuts that are specifically tailored for the wealthy with few benefits for middle class Americans in the long run.
This tax bill has been rushed through congress so fast that a proper and responsible proper piece of legislation is not being passed, and it can even be seen as foolish. It is astonishing how quickly this bill has gone through congress in comparison to other major tax overhauls. The earliest discussion on this tax bill occured on Oct 26, 2017 when the House and Senate passed their Budget resolution. The House then released its tax bill on Nov 2, 2017 and the senate released theirs on Nov 9, 2017. That means that it took a few days short of two months to have a final bill written out and ready to be voted on as of Dec 18, 2017. Two months in comparison to the two and a half years that it took congress to pass the Reagan tax reform. This short time frame does not offer enough time to properly create, discuss, change, and change again a tax bill that will literally affect every American. Major legislation such as this needs to be discussed at length and reviewed multiple times before it should be passed. It should also have some sort of bipartisan support such as the support that the Reagan tax overhaul had from both Republicans and Democrats in Congress. The Tax Cuts and Jobs Act was also largely created behind closed doors with little public opinion involved and only one public hearing after the bill had been finalized, which is not the right way to pass a major bill when it affects so many people. Public opinion itself has also not been supportive of the tax bill with most polls having the general disapproval ratings around 49% and stating that the general public has concerns about the increase of federal debt as well as the large tax cuts to businesses. With nearly half of Americans disapproving of the bill, leaders of congress should seriously take into consideration what the American people think by having more public hearings on the bill before it is even considered being passed. The way in which this tax bill has been pushed through congress is completely ridiculous and incredibly irresponsible of lawmakers.
So why do Republican lawmakers still want to pass a bill that goes directly against claims that politicians made to decrease the national debt, does little to benefit the lower and middle class and mainly benefits the wealthy and businesses, was only discussed for two months, and is unpopular to the American public? The answer to that is the growing issue of party preservation, advancement, and allegiance in favor of what is best for the people of America. Republican lawmakers are desperate to pass any substantial legislation during a year when Republicans control both the house and senate as well as the presidential seat. It would be incredibly embarrassing if Republican lawmakers were unable to pass any legislation during a time when they have control over the federal government. This desperation translates into lawmakers voting for bills that do little to help people and instead reaches the GOP’s goal of passing legislation before 2018. This is not only a fault of the GOP; the Democratic party also suffers from this growing trend of allegiance to the party over the issues themselves. The role of politicians especially in a democratic republic is to do what is best for the people that voted for them. They are the representation of our society in the federal government, yet they continue to act in a way that goes directly against the American population’s wishes. If lawmakers continue to vote on issues based primarily on party lines, the United States as a whole will begin to suffer greatly.