The Reform Party prides itself on sticking to a set of core principles throughout its existence, with regard to fiscal accountability.
- For decades now, year-on-year federal budget deficits have resulted in an out-of-control federal debt load, which represents a clear and substantial danger to current and long-term viability and stability of our Republic. This issue must be addressed, and each year the problem only gets more difficult to fix. Any politician that tells you this is not a concern, is lying to you.
- Any solution to this will not be easy, and will not be painless. It will necessarily have to combine spending cuts across the board with increases in federal tax revenue. There can be no sacred cows when it comes to spending cuts, and the tax revenue increases will have to come from either reducing exemptions, increasing effective tax rates, or increasing who or what is taxed. Any politician that swears on a stack of IRS tax code that they have an answer to our increasing debt that does not include both of these is lying to you.
- Any changes to the tax code must be at worst be “total tax revenue neutral” and must not negatively impact those who are already struggling to get by, nor should they negatively impact the economic powerhouse of our economy, which are middle-class consumers. We reject the idea that we can grow the economy by making the rich, even richer, and they will somehow gift the other 99% of the economy with jobs as a result. We do not believe in trickle-down economics. Economic growth is generally driven by demand, not supply.
- We believe that tax and spending decisions at the state level are preferable to doing it at the federal level, and tax and spending decisions at the local level are preferable to doing it at the state level. Local is better.
- We believe that legislation should be focused on its core purpose, and that the public (and the legislators voting on it) must have ample time to review the final bills thoroughly before any vote is held. How can we provide feedback and guidance to our duly elected representatives if we can’t review the bill before a vote is held? We are seeing, over and over, that our elected officials are receiving bills from committee and voting on this “on faith” that the committees have done due diligence, or based on the urging of party leadership, without any ability to actually see what is in the bill. This is a problem with both incumbent parties. And frankly huge swaths of these bills are using cookie-cutter language straight from lobbyists and special interests without event the committee members fully vetting the language.
The tax bills which have recently passed the US House and Senate violate all of these core principles, and regardless of your ideology and party affiliation, should be recognized as bad for most of America.
Some of what the current bill does includes:
Things that reduce tax burdens and decrease tax revenue:
- It reduces the top tax bracket from almost 40% to 38.5% and that rate kicks in for married filing jointly at $1 million dollars instead of at $480,000 dollars joint income.
- It reduces the top tax bracket for S-Corporation owners that do “pass-through” earnings from almost 40% down to about 30%.
- It increases the standard deduction for married filing jointly from $12,700 to $24,800.
- It increases the exemption for estate taxes for married couples from $11 million to $22 million.
- It increases the exemption for the Alternative Minimum Tax.
- It decreases corporate tax rates from 35% down to 20%.
- It improves businesses’ ability to expense asset purchases.
Things that increase tax burdens and increase tax revenue:
- It repeals a lot of popular itemized deductions including SALT (state and local tax deductions).
Also note that the corporate tax cuts are permanent, while the individual tax cuts expire in 10 years and would have to be renewed.
Why do we say that this bill is bad for America?
- According to the Joint Commission on Taxation (JCT), which is a nonpartisan Congressional body staffed with professional tax and budget analysts, economists, and tax attorneys, this tax bill will not make budget deficits better, it will make them substantially worse. JCT projects that it will take our already bad deficits (over half a trillion dollars in additional debt each year) and make them worse, adding another $1 TRILLION dollars to the national debt over the next 10 years. Other nonpartisan analysis gives a worse result, stating that the total additional debt could be as high as $1.5 trillion over the next decade. That’s not total debt, that’s how much WORSE this tax bill will make the debt, on top of how bad it was already going to increase.
- This tax bill, as stated above, is not paired with spending cuts to offset the decrease in tax revenue.
- This tax bill is not even tax-revenue neutral. While it does a huge reshuffle in WHO pays taxes on what (reducing corporate taxes and reducing tax brackets, while offsetting this with removing or changing a lot of tax deductions) it is nowhere near tax revenue neutral. It makes the debt worse, significantly worse. As far as impact, what we will see is a huge disparity in winners and losers with this tax bill. On average, the poor will see a negligible direct result, the middle class will see a mixed result, and the wealthy will see significant economic benefits at the expense of the federal debt, which we will all have to deal with down the road. We’ll go into that below.
- This tax bill significantly reduces the ability of taxpayers to deduct state and local taxes on their tax bill (SALT Deduction). This means that people who live in states with higher local and state taxes will be seriously financially hurt compared to those who live in states which have lower state and local taxes. While this is offset by larger standard deductions, there is going to be a much larger benefit for states that already have lower local taxes and more harm to middle-class taxpayers in areas with higher local and state taxes. We believe that this will discourage the shifting of services and decision-making to the state level, and is in direct opposition to the idea of smaller federal government and local decision-making.
- This bill is a Frankenstein’s monster of last-minute edits, and it’s impossible that any of the legislators voting for or against it actually knew what was in it, nor what the full implications will be. The full 500+ page proposal was not provided to the Senate Finance Committee until November 21st, but was somehow vetted thoroughly enough in 7 days to pass to the full Senate on November 28th. After a flurry of last-minute amendments, including proposals that were ONLY provided to lobbyists and not to the general public, the final bill was made available after most of us were asleep, and voted in after midnight. My fellow Americans, this is not the way to do the people’s business unless you are more concerned with cramming something through than with actually doing the right thing. This same kind of garbage legislating is how we got the so-called Affordable Care Act. It was bad for America then, and it’s bad for America now.
So who are the winners and losers here?
The Republican Party and President Trump. This tax bill allows the Republican Party and President Trump to point to a victory-on-paper. A tax reform bill has been a core promise of both Republicans and the President.
The Wealthy and Middle Class Taxpayers in States with Low Local Taxes. The wealthiest earners in the US are going to see several percentage point increase in after-tax income due to this bill. The middle class will see about a 1% increase in after-tax income. ON AVERAGE. In states where local and state taxes are already low, and they weren’t taking itemized deductions anyway, middle class taxpayers will see a significantly larger tax decrease. But in states with higher state and local taxes, it could be a wash or even a tax increase for them.
Large Tax Firms. Because of the speed at which it was pushed through, the lack of thorough review and clear language will be an absolute boom for tax and accounting firms that handle large corporate and wealthy tax accounts. There are going to be huge loopholes.
Property Landlords. They are able to depreciate the value of the property over shorter timespans and can continue to deduct their mortgage interest.
The Middle Class Taxpayers in States with Moderate and High Local Taxes. The middle class in states with moderate state and local taxes that used to itemize because of it will probably see very little benefit from this tax bill on their net income. Even worse, the 20% of American middle-class taxpayers in areas with higher local and state taxes will see their net taxes INCREASE and take-home pay decrease.
Some Real Estate Owners and Sellers. Many of the deductions you got when owning or selling a house have been reduced or limited, including deducting home equity loan interest.
Individual-Filing Tax Firms. Because of the higher standard deductible and removal of a ton of tax exceptions, small tax firms that mostly do households are going to find a much larger percentage of people just taking the standard deduction, regardless of whether the households are paying lower or higher taxes as a result.
The Proper Functioning of the Legislative Process. Like the Affordable Care Act, this bill was crammed through using procedural shortcuts and without due diligence. It’s crammed full of special-interest and lobbyist gifts as a result, because there wasn’t time for outrage to impact the votes of our representatives.
The future Congress and President. These guys have been handed a time-bomb with a 10-year fuse. The individual tax cuts expire in 10 years, but the corporate tax cuts are permanent. That puts a future Congress and President in very bad position, and who knows what kind of lunatics we will have in Congress in 10 years, which will require another Congress, made up of who knows what kind of lunatics, to decide what to do with it.
America’s Economic Viability and Stability. This bill, despite the protestations of its supporters, will have significant negative consequences for the nation as a whole. It will further exacerbate our federal debt. This merely “kicks the can further” and could cause even further economic damage.