Reno Gazette Journal December 24, 2017
Contrary to the negative press and partisan opposition to the recently passed tax reform bill, the tax reform bill is an excellent Christmas gift to America. Several claims have been made by partisans who are opposed to the tax cuts. Let us examine some of those central claims.
Let’s start with the deficit. The CBO incorrectly claims (discussed in my opinion piece on November 22) that this bill will increase the deficit by $1.5 trillion over 10 years. It is interesting to see some feign concern about the potential deficit. Where were these deficit hawks when President Obama increased the deficit by $1.5 trillion a year while he was in office? When it comes to increasing deficit to grow welfare, they are all in, but when it comes to putting money in people’s pockets deficits suddenly become a concern.
The next claim: This is a tax break for the rich. If you define “rich” to include anyone who pays taxes, that would be accurate. For starters, the standard deduction essentially doubles, resulting in lowered taxable income. This bill “progressively” benefits those with lower incomes. Consider someone working at the Amazon warehouse or the Tesla factory who makes $15 an hour ($31,200 a year). Not paying any taxes on the first $12,000 makes a big difference to that worker than it would to someone who makes $250,000. On top of that, every single one of the seven tax brackets will see a tax cut. The child tax credit doubles under this reform, again benefitting lower income families. Come February, vast majority of Americans will see an increase in their paychecks.
In addition to the above points, increasing the standard deduction will also simplify the filing process for many, reducing the number of filers who itemize from 33% to approximately 11%. Complexity benefits the wealthy who can hire accountants and lawyers and a reduction of complexity evens the playing field.
They claim this is a tax break for corporations. The current corporate tax rate of 35% is the highest in the industrial world. This tax bill drops it to 21% (which is still very high). Compare that to Ireland where the corporate tax rate is 12.5%. Wonder why tech companies like Apple have a strong presence in Ireland? Apple’s website states that they pay 7% of all corporate income taxes payed in that country. Wouldn’t it make sense to lower our corporate taxes so companies like Apple expand and create jobs in the US instead of in Ireland? Besides, if lower corporate tax rates are such a bad idea why are liberal states like New York running TV ads touting themselves as business friendly because they have “dozens of tax free zones” and “pay no taxes for 10 years”?
One final point: Based on the most recent data available, the top 1% of filers pay 38% of all federal income tax and the top 20% of filers pay close to 70% of all federal income tax. Success should be rewarded, not punished. Killing the goose that lays the golden egg may be good politics, but it is poor economics.