I find a lot of press comments about the tax bill misleading and unfair. It is being billed as a cut for the wealthy and a tax hike for low earners. The truth is that all levels of income stand to benefit. Individuals who will see higher taxes are 1) high earners in high tax states and 2) owners of high value real estate.
Major news sources irresponsibly refer to the temporary nature of the individual tax cuts which sunset after 10 years. However, this was tactically necessary—the Senate wanted to pass the bill with a simple majority and in order to achieve that, the bill could not cause a deficit 10 years hence. And so the individual tax cuts are temporary to accommodate Senate rules, not because they are meant to expire. During some future Congress, when the expiration of this “temporary” reduction on individual taxes nears, it should be a popular enough policy to extend the tax cuts.
Another fact to keep in mind is that corporate taxes amount to about $350 billion a year, far below individual tax revenues to the Federal Government. The reduction in the nominal corporate tax rate from 35% to 20% not only makes the United States more competitive for businesses looking worldwide to locate but multiplying the $350 billion number by four sevenths reduces the corporate tax revenues from $350 billion to $200 billion. Compare this to the total Federal Budget of over $4 trillion. Moreover, large corporations often do not pay the 35% tax rate because of many tax incentives and credits that well paid tax attorneys are able to ferret out. The impact of this cut should disproportionately favor new business entrants and small businesses and should be smaller than the articles presume.
Under the Senate bill, the child tax credit doubles from $1000 currently to $2000. Ultra-low income households with multiple dependent minors should benefit substantially from this.
There have been items that disturb me too. The allowance for Arctic oil drilling disturbs me. The Republican insistence on supporting an industry that is arguably in decline is…ridiculous. The punitive excise tax on Puerto Rican goods is also disturbing. As a resident of California, I can’t love the elimination of the SALT deduction. And I’m concerned what the cap on real estate tax deductions will do to real estate markets in California, New York, New Jersey, Fairfield County, Connecticut, and parts of Florida. I’m disappointed that, once again, we have another major piece of legislation that is supported along partisan lines.
But what grates the most is the biased lens through which the press has interpreted the proposed bill and the reverb these inaccuracies have had in the media. It helps no one. This bill does indeed benefit the low and middle income earners. The 10-year sunset is artificial and rectifiable. Whether you like the Republican party or not, it just makes sense that the bill would benefit their base of dispossessed workers and small business owners. They are the reason they’re in power in the first place.