Clearly this is a very happy of New Year, not only for Republicans but for all Americans, except those who think a poor country is preferable to a rich one. The historic tax bill is much more President Trump’s "Yuge" than Rep. Nancy Pelosi’s "con job." This essay will sort it out from three perspectives: economic growth, legislative politics and "bonus treats."
Virtually all the near term economic growth in this bill will come from the lowering of the corporate tax rate from 35 percent to 21 percent. This is arguably the single most pro growth legislative tax change in American history. It has been decades in the making.
What took so long for something that is so simple and so obvious? It’s always billed as "tax cuts for the rich," no matter how many jobs follow or how much more affordable oil we produce.
The economic growth will come over time as money is repatriated (as much as two trillion dollars) and capital budgets are increased for domestic investment. There is no downside to this rate cut. There are those on the left who argue that this is no big deal because average corporate taxes are 24 percent already. They are either ignorant about the differences between average and marginal tax rates or they think everyone else is. Two trillion dollars sit in Europe because President Obama would not let them return without a 35 percent "haircut."
But what about doubling the standard deduction and lowering the other six personal income tax brackets? These provisions are what I call the benefits of legislative politics. They are not big economic drivers. They are vote drivers.
The first votes they drove were the fence sitting Republicans in the U.S. Senate. The next votes they will drive will be the November 2018 mid term elections, another good cycle for the GOP. By then everyone’s take home pay will be more and the middle class would have seen some financial benefit.
But the 4 percent GDP (Gross Domestic Product) growth they’re going to see, feel, and read about in the Fall of 2018 will be brought to us by the new 21 percent corporate tax rate, not by the reduction in long form filers from 30 percent today, to under 20 percent in the future.
Make no mistake. There are a bunch of bonus treats in this tax reform that are almost as powerful as the corporate tax rate cut. Front and center is the end of the Obamacare individual mandate. Obamacare was never meant to make Americans healthier.
It was always meant to effectively nationalize the one sixth of our economy referred to as healthcare. And then Obamacare was about transferring massive amounts of money from fiscally healthy families to fiscally challenged citizens and non citizens, legal or not.
My daughter’s family would have to spend $20,000 (between the premiums and the deductibles) before they could get one dollar of reimbursement. No more. They’ll now buy what they want from health insurers who will meet that market. Remember when Sen. John McCain, R-Ariz., kept us from repealing Obamacare? Well, Sen. McCain took Sen. Chuck Schumer, D-N.Y. gave.
Remember when President Obama and his Democratic Congress locked the Republicans out of the Obamacare conferences? This time Sen. Schumer and the Democrats locked themselves out. Ergo, repeal of the individual mandate. Thank you Senator Schumer.
And another big bonues treat is drilling in the Arctic. No Democrats, no drilling opponents. No muss, no fuss. Energy independence — here we come. And last, but certainly not least, is the cap on state property, sales, and income taxes. For high tax states think, New York, New Jersey, Connecticut, Illinois, and California. This could begin a brain drain. For low taxes pro business states like Florida and Texas. The beat goes on.
So what were the Democrats thinking? They had two thoughts. The first was that the John McCain Republicans would never let this bill pass. The second was, even if the bill passed, tax cuts, repatriated dollars and the gutting of Obamacare would never be popular. You can’t make this stuff up. As good as 2017 has been, 2018 is going to be even better.
Happy New Year.
Sid Dinerstein is a former chairman of the Palm Beach County Republican Party. He founded JBS Associates, a 600-person financial service company, and currently combines politics and business with Niger Innis in Inclusive Elections LLC, a firm that brings urban electorate voters to the GOP. He is the author of "Adults Only: For Those Who Love Their Country More Than Their Party." For more of his reports, Go Here Now.
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