President Donald Trump and Congressional Republicans have a tax plan up for consideration. Tax relief is badly needed, as is a budgetary overhaul that addresses and works to reduce the annual deficits and the insane national debt.
Analysts say that many good things are proposed but, of course, it is not – and cannot be – perfect, or even acceptable, for everyone.
The following three takeaways come from an analysis by the Heritage Foundation:
1. Simplification - The proposed plan would vastly simplify the tax code by eliminating a host of unnecessary and inefficient provisions designed to benefit special interests; would also simplify the process of tax filing by doubling the size of the standard deduction, which would cut in half the number of taxpayers who need to itemize their deductions; collapses seven different tax rates into four and simplifies the tax code.
2. Lower Rates - The proposed plan would drastically lower tax rates for lower-to-moderate-income individuals and families, small businesses, and corporations. The new 20 percent corporate tax rate would help make the U.S. competitive with the rest of the world, and the top 25 percent small business or pass-through tax rate would go a long way toward stimulating entrepreneurship, job creation, and income growth across all income groups in America.
3. Business Taxes - The combination of business tax reforms — including five years’ worth of full expensing, and a modernized international tax system — would provide a huge boost to the U.S. economy and its workers; have the potential to bring trillions of dollars back into the United States and to significantly boost economic output, jobs, and incomes within the U.S.
Heritage notes an area that is popular with liberals, but that is an economic negative: “By maintaining the top marginal tax rate on individuals, however, the plan would fail to achieve optimal economic growth, as it leaves a significant portion of economic activity subject to a 39.6 percent federal tax rate (43.4 percent including the Obamacare surtax).”
In this crazed Congressional atmosphere, the special interests and fact-twisters will interfere with the tax plan’s efforts at reforming the current tax system from the chaotic monster that it has become into a simplified and manageable one. This environment means progress will be slow, but we must take what we can get.
Naturally, those pro and con are putting forth their assessments to rally the troops, and the truth often gets trampled beneath the stomping feet of the partisans.
"The more people find out about it, the less they'll like," Senate Minority Leader Chuck Schumer, D-NY, said. "This bill is like a dead fish. The more it's in sunlight, the more it stinks, and that's what's going to happen." Thanks for the graphic description, Senator, and for providing no details.
Not to be outdone, House Minority Leader Nancy Pelosi, D-Calif., said, "The American people deserve real, bipartisan tax reform that puts the middle class first. This Republican plan doesn't do any of that. In fact, it's a giveaway to corporations and the wealthiest." More blather that slings general concepts, but provides no substance, and is at odds with reality.
The idea of America’s Founders was a limited government, one that didn’t overly intrude on the lives of its citizens, and therefore would ideally be relatively small, relatively inexpensive and quite efficient. Obviously, through the decades our elected officials have been unfaithful to that design.
Over time government has grown in virtually every way that it should not have. The power of the IRS and the bulk and complexity of the tax code are good examples. The U.S. Tax Code consists of 82,000 pages. It contains a long list of taxes, including one that taxes people for the privilege of dying. Change is unarguably needed.
A major criticism is that the Republican plan will add to deficits and the national debt. But this depends upon which scoring analysis you use.
Simply put, static scoring considers that tax cuts reduce tax revenue, and raise the deficit. Dynamic scoring, on the other hand, takes other factors into account, such as the economic boost from tax cuts and reduced regulatory restraints on economic activity.
Tax cuts and regulation reduction are the mother’s milk of economic growth. Businesses respond to them like plants do to sunshine, rain and fertilizer; they grow, producing jobs and raising tax collections.
Tax cuts obviously put more money at play, as people buy more of the things they want and need, and businesses then must increase the available supplies of the things people are buying in greater quantities, and grow to meet the demand.
Everyone benefits from measures that drive economy activity. While it is unlikely that the economic activity produced by the plan will completely erase the deficit created by tax cuts, it will erase some of it, and it produces other benefits that cannot be ignored. And needed spending restraint will make up the difference.
A perfect bill, one that everyone in Congress likes, is virtually impossible. However, this plan is a good start on needed improvement, and it must be viewed for the good it accomplishes rather than for the few less-than-perfect elements it contains.