Tags: tax reform | cuts | standard deduction | midterms

The New Tax Reform Law Could Save the GOP in the Midterms

The New Tax Reform Law Could Save the GOP in the Midterms
(Dave Bredeson/Dreamstime.com)

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Thursday, 22 February 2018 04:49 PM Current | Bio | Archive

The Republican tax bill has gotten a lot of flak since being passed by Congress in December. Though the majority of Americans’ taxes will (for the time being) go down, the GOP reform is less popular than tax hikes under Bill Clinton and George H.W. Bush. The question is why — have Americans misjudged the bill, or are they correctly skeptical?

One criticism of the legislation is that members of Congress were not given enough time to read the 500-page bill. Though they were presented with the full text of the bill at what was arguably the last minute, to claim they had absolutely no time to understand its contents is an exaggeration. The key points of the bill had been up for discussion with the Senate Finance Committee for the past three years. Surely if Senators were passionate about the issue, they could find time over 3 years to investigate the bill for themselves.

Assume for a moment that there actually was adequate time to fully read the bill, would anyone in Congress have done it? This is doubtful. The embarrassing problem of legislators not reading the legislation they vote on has been around for decades. It’s such an issue that Senator Rand Paul has attempted to pass a “Read Bills Act” requiring elected officials to actually read the proposals on their desks. But they’re busy people, and their time is better spent on other pursuits — according to one study, Congressmen and Senators spend 40 percent of their time soliciting votes and raising money for their next campaign.

Another document that most members of Congress have not read, and certainly not most Americans, is the Internal Revenue Code (more simply, the Tax Code). It’s difficult for people to understand what’s changing, when they likely don’t understand what the rules were in the first place. There’s a reason that many Americans hire professionals to do their taxes. The Tax Code is exceedingly complicated, because it contains a vast assortment of detailed rules and specific exceptions inserted over the years as a result of lobbying by different interest groups. Some of the new updates no doubt fall into this category as well.

So, because neither members of Congress nor average Americans have read the Tax Code or the GOP tax bill in their entirety, the focus is on the biggest, most obvious changes. What are they? Lower individual tax rates, a larger standard deduction, and a significantly lower corporate tax rate — each of which has its pros and cons. For example, the cuts to individual tax rates are short term and expire in 2026, and while the standard deduction is larger this change is at the expense of itemized deductions, which have been eliminated.

Most economists suspect that there will initially be an economic boom as a result of the reform, but that it will not last. Wall Street analysts project that companies like Amazon, Google, and Facebook will save $4.5 billion in taxes due to the low corporate rate, and that there will be a big boost for all businesses. Savings for middle income taxpayers will be about $900-$1,600.

Even with these potential benefits, many Americans are not satisfied. One issue, as intimated above, is that people don’t fully understand the bill. Furthermore, people are more likely to focus on the negatives than the small positives they may be experiencing. The fact that all itemized deductions have been slashed makes Americans feel like they’re losing out, even though the vast majority of people will marginally benefit from the larger standardized deduction. It’s true that the individual tax cuts will expire in 2026, but this is a result of budget rules, not Republicans’ will; it’s the GOP’s intent to renew these cuts. Most Americans will thus benefit in the short term, and may very well benefit in the long term as well.

The biggest shadow on the reform doesn’t even have anything to do with what’s in it — Democrats and other Americans are predisposed to disliking the bill because Trump supported it. Though the bill is not perfect, Democrats would not have been happy with anything Republicans had drafted. In 2018, Republicans will preach the success of the bill, and Democrats will tear it apart, but the fact is, no one can be sure.

Economists do predict that the benefits of the bill will fade and that the national debt will grow as a result. But, Republicans are banking on economic growth from, primarily, the lower corporate tax rate to counteract these downfalls. There are so many variables in the economy that could change drastically over the next few years that it is nearly impossible to say what the greater effects of the reform will be. However, the early information we are getting is showing a very good trajectory that could lead to economic growth we haven’t seen since Reagan was president.

In sum, Americans should not be so quick to judge the GOP tax bill. Most of us don’t fully understand it, and it is extremely difficult to accurately predict what will happen to the economy years in the future. The tax reform law is definitely a net positive but only time will tell just how big an impact this bill will have.

Christopher Reid is an attorney out of Birmingham who owns his own general practice law firm, which handles Business, Family, and Probate Law and high-end litigation throughout the state of Alabama. Reid has held various policy positions, including working for the Alabama Policy Institute and the Heritage Foundation in Washington D.C., where he also worked for House Republican Whip Roy Blunt. In law school, he clerked for the Alabama Attorney General Office, and, after graduation, he became Health and Judiciary Policy Analyst for Alabama’s governor. His charitable work includes serving on the board of Sav-A-Life. Chris is a frequent co-host on The Scott Beason Show in Birmingham, writes political and legal commentary for publications including The Hill, The Washington Examiner, and has been quoted in The New Yorker. He regularly provides on-air expertise and political commentary for TV news shows on Fox, NBC, and Newsmax with JD Hayworth. To read more of his reports — Click Here Now.

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ChristopherReid
The Republican tax bill has gotten a lot of flak since being passed by Congress in December.
tax reform, cuts, standard deduction, midterms
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2018-49-22
Thursday, 22 February 2018 04:49 PM
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