It is entirely unsurprising in the current political climate that reducing taxes for almost everyone would produce outrage on the left. At this point, If the GOP eliminated all crime, the left would attack them for lowering the income of thieves. If all poverty were wiped away, they would likely claim that President Trump colluded with Putin to violate the sanctity of impoverished ghettos. Hell, if Trump walked on water, they would probably respond by complaining that he can’t swim.
Seriously though, is the left’s chicken-little response (the sky is falling) to landmark tax reform a result of the bill itself, or the fact that it may actually become popular and help Trump and the GOP as we head toward midterm elections?
Democrats spent months throwing the kitchen sink at this landmark legislation, ultimately failing to stop its passage. But their class warfare – straight out of their decades-old playbook which demonizes the wealthy and corporations – succeeded in driving the bill’s popularity down to near 25%. This is jaw-dropping for a reform that will allow a significant majority of Americans, as well as the businesses on which they rely for jobs and income, to keep more of their own money.
But wait, that’s not all. Even more outrage ensued on the left when, upon passage of the tax legislation, several large corporations ponied up $1000 Christmas bonuses for hundreds of thousands of their employees. Some even raised their minimum wage to $15 per hour – the exact rate the left has loudly endorsed in recent years.
Is this Paradise Lost in the make-believe world of the American left? Or Paradise Regained for the Right? On Liberty Nation Radio, we put that question to a man who spends all his time studying, thinking about, and advocating for tax reform: Pete Sepp, President of the National Taxpayers Union:
Tim Donner: House Speaker Paul Ryan was giddy about this legislation. He said this kind of tax reform is something he’s dreamed about since he entered public life many years ago. Do you feel the same way?
Pete Sepp: Well, having been in this business for about 30 years now, having witnessed a lot of very good ideas for tax reform come and go, some of them are still around, I think this is a very good start to the type of tax system most Americans want. Yes, we have more work to do, but bottom line is a typical family with two kids is going to save easily $3,000 a year in taxes under this plan if they happen to be around the median income with two earners in the household. Businesses will become more competitive, both small businesses who operate domestically, who get a large deduction for their income out of this bill, and larger businesses, who do activities abroad. They will receive a 21% corporate tax rate down from 35% on the federal level. That will make us much more competitive with our trading partners, and their earnings abroad will no longer be taxed in such a discriminatory way as to cause them to stash a lot of cash overseas.
All in all, this is a very good bill, one that’s going to help our economy kick into a higher gear, as well as our job creation rate.
Tim Donner: You’ve done a good job of describing, or summarizing, the major pieces of this legislation, and as much as this bill, though, is a game changer for businesses, big and small, and relief for ordinary taxpayers, one of the things that’s flown under the radar in this bill is the elimination of the individual Obamacare mandate. Might that wind up being perhaps just as important as the changes to the tax laws?
Pete Sepp: Oh, yes, indeed, because by removing the individual mandate penalty from the backs of the American people, up to $600 currently for those who choose not to participate in the Obamacare system, you also create an opportunity to transform the rest of Obamacare. Congress will be able to revisit many of the mandated benefits under the exchanges, the myriad of taxes, things like the Health Insurance Tax, which is going to take effect immediately in 2018. Congress is going to have to address all of those types of issues when they get back into session next year, and this is a good start to that discussion.
Perhaps, by working on the individual mandate first, we can unite around that principle and say, “Okay. What more can we do going forward?” Unfortunately, in this year, Congress could not do that, so maybe tax reform is a fresh start.
Tim Donner: This is clearly growth-oriented legislation, but the prediction that the national debt will increase by a trillion and a half dollars over the next decade are based on cautious growth estimates of under 2%. What do you personally believe is a realistic expectation for growth with this reform tax code going forward?
Pete Sepp: If we were to realize the growth that many economists predict would occur, especially with the business rate reductions and the fact that full, immediate expensing would be allowed for business investments for at least five years under the bill, why, we could very well see that deficit figure of 1.5 trillion over 10 years fall in half, and I know that that might be too optimistic of a prediction for opponents of the bill, but I’d also point out that while we worry about the deficit increasing, we also need to be worrying about the drivers of those deficits, the causes, which happen to be, generally, entitlement programs.
The fact is that unless we have economic growth that empowers middle-class Americans to save more for their own retirement, to provide a cushion for future healthcare expenses, the entitlement problem is going to be more difficult to address. I’m not saying that we can grow our way out of all federal deficits. There will still be some hard decisions ahead, but tax reform can actually help those decisions to be a little less difficult going forward by providing us with the strong economy we need to address entitlements in a thoughtful manner.
Tim Donner: All right. Let’s talk a little bit about the Democratic party. Every single Democrat in Congress opposed this bill, much like every Republican opposed Obamacare. It’s fun to watch them decrying the projected increase in the national debt, given that Obama’s national debt on his watch doubled, but is there any validity to any of the Democrats mudslinging about this bill?
Pete Sepp: I’ve yet to find any of it. Even if you look at the estimates produced by the Joint Committee on Taxation as to which income groups benefit the most, a good fellow, colleague of mine, at the Cato Institute, Chris Edwards, actually crunched some numbers using the government’s own data, showing that when you look at income and estate tax liabilities, for example, the million dollar and over income category, millionaires here, get a tax reduction of about 6% under this bill. Those in the $50-75,000 income range get a 26% tax reduction. They are getting proportionally almost five times the relief or more than four times the relief, any way you care to look at it, than millionaires are. That is a heavily skewed tax bill in favor the middle class, not the rich, and we’re using the government’s own numbers to show that.
Tim Donner: Well, I don’t think the Republicans were particularly effective in pointing out analyses like that in trying to sell this bill because, of course, it remains unpopular, which I suspect will change as soon as people see less money taken out of their paychecks and more left in there once the calendar turns to 2018, but if there was one thing you would have liked to see included in this bill that wasn’t, one thing, what would it be?
Pete Sepp: I think we could have done better on tax simplification. The relief that’s being provided to small businesses in the form of a deduction, a 20% deduction against their earnings, provided they’re filing as small businesses using the 1040 return, that has a lot of complex calculations behind what constitutes the business income. Those rules are still going to be difficult to figure out. If you look at the alternative minimum tax, it goes away on the corporate side, it is reduced in its impact on the individual side. We probably should have gotten rid of that across the board. Same with death tax. That involves a lot of very complex financial planning procedures for folks who have, say, medium-sized family businesses and they don’t want the death tax to touch that after they pass away. That requires lots of expenditures of time and trouble while the owner of the business is still alive.
The real uniting factor behind all of these provisions is if you could get rid of these types of nuisance taxes, you could make the system a lot simpler. We still have a ways to go on tax simplification.