We believe every-day Americans know better how to spend their own money than the federal bureaucracy, and we want to help them keep as much of that hard-earned money as we can.-–President Donald J. Trump
Americans Need Tax Reform
Americans need tax reform we are told over and over again. Surprisingly, many Americans disagree.
The Trump Administration informs us:
The current tax code is a burden on American taxpayers and harmful to American job-creators. It has grown out of control in length and complexity so that many Americans must rely on professional help to file even the simplest return. Our outdated tax code also makes our businesses uncompetitive as other nations provide lower tax rates, and incentivizes American businesses to move their headquarters or offshore jobs. President Donald J. Trump is working to reform our tax system so that Americans are treated fairly, can keep more of their hard-earned money, and companies can bring jobs back to the United States.
- Taxes may be a burden to some and harmful to others, but they are nevertheless necessary. Lower taxes for some and higher taxes for others doesn’t change that.
- If the tax code is unreasonable in length and complexity, it is because Congress wanted that. Lengthy regulations aren’t a problem but a necessity for making tax law clear.
- The idea that lower taxes for corporations creates jobs is Republican dogma unproven at best. This can be labeled “trickle down.”
- Many may need professional help to file their taxes, but it is more likely that wealthy persons need help than those with simple returns.
- Old isn’t necessarily outdated–our Constitution is old.
- Tax law does allow businesses to hide profits overseas, but lower taxes isn’t the only answer for that problem, if it is an answer. What allows business to hide profits overseas is tax loopholes enacted by Congress.
- The Trump family may keep more of their money, but others not so much.
Is it true that “Americans know better how to spend their own money than the federal bureaucracy?” It may be if we are talking about buying furniture, but not so much if we want to spend on the Federal Courts, national parks, our armed forces, our countries infrastructure, CDC, Social Security, universal health care, FEMA, and numerous other vital government agencies that support our general welfare.
A Road Map to Move The Tax Cuts into Law
House and Senate Republicans are racing to hammer out a tax-cut agreement that blends the House bill passed on Nov. 16 with the Senate version that squeaked through at 2 a.m. Saturday with one vote to spare. Failure is not an option. They must deliver a final bill to the president for signing before Christmas.
The stakes are high economically and politically. For too long, America’s uncompetitive corporate-tax rates have suppressed growth and wages, and driven companies to leave the United States.
If Republicans fail on tax reform, they could lose their grip on Congress in the midterm elections. That would leave President Trump without a legislative partner to push through his pro-growth agenda.
Here’s the roadmap for success: The House should adopt the Senate’s repeal of the ObamaCare penalty, and the Senate should agree to slash corporate taxes as of Jan. 1, 2018, not a year later as the Senate bill currently says. Delaying the corporate tax cuts risks an economic downturn in 2018 and defeat for GOP lawmakers next November.
Senators postponed the corporate-tax cut until 2019 in order to pare $127 billion from the cost of tax reform and stay within Senate rules.
But economist Arthur Laffer warns that delaying the cut will encourage companies to defer production and income for a year so that their profits will be taxed at the lower rate. That could tank the economy in 2018, and take the GOP majority in Congress down with it.
A safer bet to keep the cost of the bill within Senate rules is for GOP senators to embrace the House’s proposal for a $1,600 child tax credit, instead of raising it all the way to $2,000. That compromise would cut $150 billion off the cost.
Doubling the child tax credit to $2,000, as the Senate bill does, and paying for it by delaying corporate tax cuts, is a whopping mistake.
“Yes, everybody likes little kids. But not everyone has them. Only a small segment of the population benefits from that credit,” explains economist Larry Kudlow, a chief architect of the Trump tax plan. “Everyone will benefit” from reducing corporate tax rates immediately. It’ll “create an investment boom. There will be no losers.”
What should the House take from the Senate’s version? According to House majority leader Kevin McCarthy, his members are ready to adopt key Senate provisions, including continuing to allow home-buyers to deduct interest on up to a $1 million mortgage. The House plan caps it at $500,000 mortgages.
Most important, House members are eager to include the Senate’s repeal of the ObamaCare penalty for not buying insurance. Bravo.
Democrats, meanwhile, are claiming that eliminating the penalty — in effect, making ObamaCare voluntary — will spell disaster for millions of people with ObamaCare plans. That’s demagoguery. People who want to stay in ObamaCare won’t lose their subsidy or their eligibility.
But abolishing the penalty will be a big tax break for the 6.7 million filers currently getting whacked for not buying ObamaCare-compliant insurance.
Removing the penalty may cause ObamaCare premiums to rise slightly — the Congressional Budget Office speculates about 10 percent — but most buyers get subsidies that insulate them from premium hikes. Those who don’t will finally have the freedom to buy plans without ObamaCare’s costly requirements and save a bundle on insurance.
As the calendar runs out, House and Senate Republicans will have to compromise on a dozen other differences between their tax bills, including the treatment of medical expenses, interest on student loans, the alternative-minimum tax and gains on selling stock.
There will be winners and losers with each decision. But on balance, Americans will get to keep more of what they earn. And businesses will be encouraged to invest, grow and hire.
Tell the prima donnas and fence-sitters in Congress who failed to repeal ObamaCare that it can’t happen again. The nation needs tax cuts now.
Betsy McCaughey is a senior fellow at the London Center for Policy Research.