Republican party leaders believe they must pass a tax bill. After their failure to repeal Obamacare, Republicans are desperate to demonstrate they can achieve a major legislative victory. But desperate people do desperate things, and this bill is a Hail Mary designed to demonstrate Republican legislative competency, not to improve the economy.
The tax bill will not be a Republican win.
Polling results show the bill is unpopular with the public, an astounding result for a tax cut. The average of five polls shows 46 percent disapproval and 32 percent approval. Amazingly, this tax cut is actually less popular than the 1990 Bush and 1993 Clinton tax increases.
The main reason for this lack of popularity is that citizens perceive, correctly, that this is primarily a tax cut for the wealthy. In the Senate bill, tax cuts for individuals are temporary, and will be phased out by 2025. The non-partisan Congressional Joint Committee on Taxation (JCT) reports that in 2025, 22.5 million people making less than $200,000 per year will pay at least $500 more tax than today.
Conversely, tax cuts that primarily benefit the wealthy are permanent: corporate taxes, pass through business taxes, the alternative minimum tax, and the estate tax. The JCT reports that 70 percent of millionaire households would get a tax cut.
The next huge issue is the expansion of the federal debt. The debt will increase $10 trillion in the next 10 years based on current law. Instead of taking the courageous steps to reduce this unsustainable debt, Republicans decided to add about $1 trillion to the debt, based on dynamic scoring.
This bill marks the Republican party’s transition from fiscal conservatives to debt deniers. Many of my Republican friends are deeply disappointed by their party’s addition of
$1 trillion to the debt.
There are other substantive reasons we should not be cutting taxes now.
The Federal Reserve is raising interest rates and selling bonds to ensure the economy doesn’t overheat due to the unprecedented amount of money in circulation. But the cuts in the tax bill would put more money in circulation, thus pitting the federal government’s fiscal policy against the Federal Reserve’s monetary policy.
Corporations are holding record amounts of cash, but they are reinvesting slowly. Dramatic reductions in corporate taxes from 35 percent to 20 percent will fill corporate coffers even more, but will not convince CEOs to make marginal investments. During a recent Wall Street Journal sponsored CEO Council, the moderator asked the CEOs for a show of hands if they planned to make more investments due to corporate tax cuts. Few hands went up, demonstrating greater investment and more jobs do not automatically follow tax cuts.
Apple is the poster child for immense tax cuts. The Financial Times estimates that the tax bill will allow Apple to avoid $47 billion in tax when they repatriate overseas earnings to the U.S. Their CFO has indicated Apple would prioritize this fortune for stock buybacks.
The bill has no Democratic support. The opposite happened with Obamacare, which had no Republican support. Republicans blasted Democrats for seven years for this mistake, but now they are making the same blunder. Major legislation created with no support from across the aisle is unstable and will not stand.
Congressional Republicans paint the tax bill as a major achievement, but I disagree. How hard is it to redistribute future earnings from the non-voting young and unborn to today’s wealthy donors?
This tax bill is a disaster in many ways: irresponsibly adding to the debt; rewarding the wealthy while hoping benefits trickle down to the middle class; cutting taxes when the economy doesn’t need stimulus; forcing the bill through in haste before it can be read; and misrepresenting what the bill does and doesn’t do.
You don’t have to be a Democrat to be disgusted with this bill.
Ed Conant is a retired Naval officer who lives in Savannah.
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