The House on Wednesday approved a massive Republican plan to overhaul the tax code, clearing the bill’s final hurdle in Congress and sending it to President Trump to be signed into law. The Tax Cuts and Jobs Act (H.R.1) passed the House 224 to 201 as overwhelming Republican support carried the bill past unanimous Democratic opposition after having passed the Senate on a party line 51 to 48 vote.
What does this mean for Americans? Well, that depends on who you ask. According to Democrats, this bill is essential mass murder and Armageddon. It only benefits the rich, millions will die, cats and dogs living together, the sky is literally falling.
So, what does the tax cut plan actually include? 80% of Americans will see a tax cut. Corporate taxes reduced from 35% to 21%, making the corporate tax rate more competitive with other industrialized countries. Repeal of the Obamacare mandate, eliminating the tax penalty for not buying health insurance. Opening of a portion of the Arctic National Wildlife Refuge (ANWR) for drilling. Just to name a few.
Repeal of the ObamaCare individual insurance mandate, fulfils a longtime GOP goal targeting the health-care law. The repeal, which now heads to President Trump’s desk, is the first major legislative victory for Republicans to strike down a provision of the law. Gutting the mandate that Americans buy insurance or pay a tax penalty has been a target of Republicans in every attempt at an ObamaCare repeal bill this year. However, many analysts warn that it may very well result in higher insurance premiums. Unless congressional Republicans can get a full repeal of the remaining Obamacare regulations passed in the near future.
As for the tax cuts themselves, despite Democrat talking points to the contrary, the wealthy could very well end up paying more in taxes. Though the upper rate was reduced from 39.6% to 37%, several keep deductions were lost or reduced. Most notably the State and Local Tax (SALT) deduction and the mortgage tax deduction. However, those primarily effect those who live in Democrat controlled “blue states” with high state taxes and high real estate prices.
Individual income taxes are the federal government’s single biggest revenue source. In fiscal year 2017, which ended Sept. 30, the individual income tax was expected to bring in nearly $1.66 trillion, or about 48% of all federal revenues, according to the Office of Management and Budget. The corporate income tax was estimated to raise another $324 billion, or 9% of total federal revenue. A Pew Research Center analysis of IRS data from 2015, the most recent available, shows that taxpayers with incomes of $200,000 or more paid well over half (58.8%) of federal income taxes, though they accounted for only 4.5% of all returns filed (6.8% of all taxable returns). With nearly 40% of the total tax burden being paid by the “top 1%.”
According to the Tax Foundation, the nation’s leading independent tax policy nonprofit, “The Tax Cuts and Jobs Act represents a dramatic overhaul of the U.S. tax code. Our model results indicate that the plan would be pro-growth, boosting long-run GDP 1.7 percent and increasing the domestic capital stock by 4.8 percent. Wages, long stagnant, would increase 1.5 percent, while the reform would produce 339,000 jobs. These economic effects would have a substantial impact on revenues as well, as indicated by the plan’s significantly lower revenue losses under dynamic scoring.”
As for jobs and job creation, wages are already rising – though slowly – and unemployment is down to 4.4% while the labor participation rate is up to 77.9%. These are continuations of previous trends, despite many dire warnings of financial collapse if Donald Trump was elected. New job creation, 1.7 million through November, has been a little slower than previous years, while the Stock Market has been breaking records almost daily. So, how will The Tax Cuts and Jobs Act effect the job market? For one, the opening of ANWR will undoubtedly produce a lot of new jobs in the oil industry. The corporate tax cuts free up capital for expansion and hiring, not to mention opening the door for the repatriation of trillions of dollars parked overseas.
“We fought long to authorize a program for energy development in Alaska’s non-wilderness 1002 area,” said Sen. Lisa Murkowski (R-AK). Adding that the terms of the bill would raise “more than $1 billion within 10 years and it will likely raise over $100 billion for the federal Treasury” over the long term. “This is new wealth from responsible development and the investment it brings,” she said. “It’s time to open up the 1002 area and it’s time to reform our broken tax code.”
Large and small corporations benefit in the tax cut bill, which at least in theory should spur growth, expansion and new business start-ups. In conjunction with regulatory reforms, the climate for new business and entrepreneurship looks better under this plan than it has in decades. In his “first major legislative achievement” President Trump and the Republican Congress have delivered significant tax cuts, repealed the Obamacare mandate and opened up a portion of ANWR for drilling. Three items that have been on the Republican wish list for years, if not decades. As we roll into 2018, and the beginning of the midterm election cycle, people will be looking at their paychecks and job prospects to see some results. Those results in the next 6 to 8 months could have a dramatic impact on the midterms.
The age old political saying, “It’s the economy stupid” will play a huge role in whether Republicans retain control or the American people opt for a divided government by putting more Democrats in office. As the President and Republicans celebrate this win, they still have a looming government shutdown to deal with, a budget, entitlements, DACA, immigration, The Wall and infrastructure to look forward to as well. Celebrations are short-lived in a political realm ruled by the question; “what have you done for me lately?” Tax cuts are a start, one in the win column after the Obamacare repeal debacle. Now the question is, one and done or the start of President Trump’s campaign promise that Americans will get tired of winning so much?