Tags: Healthcare Reform | Trump Tax Reform | byrd | salt | senate

Mixed Blessing of TCJA Still Better Than Nothing

Image: Mixed Blessing of TCJA Still Better Than Nothing
A portion of the Republican Senate bill "Tax Cuts and Jobs Act" is seen in Washington, D.C. in December of last year. (AP Photo/Jon Elswick)

By
Monday, 08 January 2018 03:13 PM Current | Bio | Archive

The Republican Congress handed Donald Trump his first legislative triumph with the TaxCuts and Jobs Act (TCJA). The president signed the bill into law before Christmas.

The legislation is as much "Scrooge" as "Happy New Year." Is flawed tax cut legislation, better than no change at all?

If strictly a binary choice, yes or no, with no alternatives, an imperfect tax cut is better than none at all. But is the glass-half-empty or full?

Good tax legislation cuts marginal tax rates across the board and simplifies the tax code.

Bad tax legislation tinkers with social policy and creates confusion. Tax laws that create uncertainty and instability throttle economic growth.

The TCJA has good and bad provisions. Most, but not all filers, will get a reduction. It adds significant pages to IRS regulations.

On the one hand, corporate taxes were fixed permanently, cutting rates from 35 percent (highest among industrialized nations) to 21 percent (compare to Canada — 15 percent, China — 25 percent, Germany — 30 percent, Mexico — 30 percent, Russia — 20 percent, UK — 19 percent).

The media portrays corporations as big, evil and failing to pay their "fair share" of taxes. The  truth is corporations don’t pay taxes, consumers do. Taxes are built into the cost of goods and services. Dollars siphoned-off for corporate taxes aren’t used for wages, new job creation or infrastructure investment. Upon the bill’s passage, numerous corporations began announcing plans which they attribute specifically to the tax cuts.

  • AT&T: Investing an additional $1 billion in its networks and giving employees a $1,000 bonus

  • Comcast: $1,000 bonus to 100,000 non-executive employees and spending over $50 billion on infrastructure investment over five years

  • Boeing: Making $300 million in employee-related and charitable investments

  • Fifth-Third Bancorp: Raising minimum hourly wage to $15 and giving a $1,000 bonus to 13,500 employees

  • Wells Fargo: Increasing minimum hourly wage to $15 and spending $400M in philanthropic donations next year

  • FedEx: Announces it's ramping up hiring

  • CVS Health: Creating 3,000 permanent new jobs

Gross Domestic Product (GDP) has grown at over 3 percent since Trump took office. The corporate tax cuts will accelerate economic and job growth.

The legislation finally kills the most odious clause in Obamacare, the individual mandate. TCJA ends the penalty for those choosing not to buy healthcare. Note: There are no cuts in any healthcare programs. Ignore disingenuous, demagogues, screaming; "People will die."

The personal income tax parts of the legislation aren’t as solid. Although reducing deductions and loopholes, the bill leaves many in place. Understanding your tax liability became more complicated.

Even The New York Times admits the majority of filers get a tax cut. The Times created a chart with 25,000 unique hypothetical middle-class filers (incomes between $40,000 and $140,000).

The Times found:

  • Nearly everyone taking the standard deduction would receive a cut

  • Filers who receive increases are primarily childless while families with children will largely receive reductions

  • People with high state and local taxes (SALT) will see the biggest federal tax increases

The new law created confusion. Residents of high-tax municipalities rushed to pre-pay 2018 taxes, only for the IRS to rule it will only accept the deduction in states which have already assessed 2018 taxes.

High SALT taxes are overwhelmingly in "blue" Democrat-voting states (i.e., New York and California). For the less skeptical, it advances candidates in those states promising to lower SALT taxes. The plan will fail, however, if Republican voters in high-tax districts flee to more tax-friendly localities. For those who relocate, sadly, moving costs are no longer deductible.

The legislation continues social engineering, rewarding families with children; living in certain areas, and with home mortgages less than $1 million. The bill, which critics call a tax cut for the rich, punishes mortgages over $1 million; second homes and home equity loans.

The personal income tax cuts sunset largely in or by 2025. The Senate passed the legislation with a simple majority instead of 60 votes because it fell under the reconciliation process. Without a detailed explanation, suffice it to say, all reconciliation bills are not equal. The Byrd Rule (named for everybody’s favorite grand cyclops, Sen. Robert Byrd, D-W. Va.) limits reconciliation legislation to a $1.5 trillion deficit score by the CBO. Staying within the Byrd Rule, forced Republicans to sunset personal tax cut provisions. Discussing the CBO score and potential deficits could fill another column.

Sun-setting the personal tax cuts creates instability and uncertainty. The same provisions limited growth after the 2003 Bush tax cuts. Economic uncertainty during negotiations to extend or end those cuts hampered growth during the Obama administration.

The Tax Cuts and Jobs Act is complicated. These are some highlights and low-points of the legislation. Republicans finally enacted a key piece of legislation. Still, I find myself staring at the glass and wondering if it is half-empty or half-full.

Andy Bloom is a former communications director for Rep. Michael R. Turner, R-Ohio, and as operations manager oversaw content for Talk Radio 1210 WPHT, and Sports Radio 94 WIP, Philadelphia for eight years. For more of his reports, Go Here Now.

© 2018 Newsmax. All rights reserved.

   
1Like our page
2Share
AndyBloom
The Tax Cuts and Jobs Act is complicated. These are some highlights and low-points of the legislation. Republicans finally enacted a key piece of legislation. Still, I find myself staring at the glass and wondering if it is half-empty or half-full.
byrd, salt, senate
839
2018-13-08
Monday, 08 January 2018 03:13 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
America's News Page
© Newsmax Media, Inc.
All Rights Reserved