Death and Taxes: The GOP Attempts Radical Tax Reform

It hasn’t been a good year so far for Mitch McConnell. Many assumed that with Trump winning the electoral vote, House and Senate, a united government would be able to pass legislation with ease. However, McConnell’s Republican Senate has failed to pass key promises.

With three attempts, McConnell failed to repeal and replace Obamacare, a humiliation for him as it had been a key Republican pledge. Now, the Republicans want to have an achievement to show for in 2018, when many Senators will have to run to keep their seats. So tax reform, one of the crucial parts of the Republican agenda, is finally on the table.

The Republicans need to have something to show for in 2018. They think that tax cuts will be something they can pass which is achievable, and will be popular with voters. It is also a major part of their shtick to cut taxes, and it appeals to many hardworking Americans who believe that they can spend their money better than the government can. This sort of message appeals to voters, which is why they’re going to make such an effort to pass it, seeing as they’ve failed hugely in other areas.

The GOP has passed a budget in the Senate to get the ball rolling on this plan, passing it by just 51–49, with Rand Paul (R-KY) being the only one to vote against it, as he believes that the deficit should not be expanded further. This is a part of the opposition to the plan that should make sense to fiscal conservatives; cutting taxes without cutting spending will raise the deficit. If the fiscal conservative movement within the Republican party is true to its word, they should raise concerns about the increase in the deficit with this bill. Paul has said that he will vote for the tax reform, however, despite his vote on the budget. Paul proposed a number of amendments to the bill that would have ensured deficit reduction by way of cuts to spending, but all were rejected. The Republicans look as if they have ditched the mantle of fiscal responsibility and deficit reduction in favour of tax cuts.

The specifics of the plan have benefits and drawbacks. On the one hand, of course America’s corporation tax rate is excessively high, the highest rate in the developed world, a whopping 35%. This leads many companies to simply avoid tax and causes capital flight as people seek to avoid paying such a punitive rate of tax. Sweden, the haven of socialism, Bernie Sanders would have us believe, has a corporate tax rate of 22% and they don’t seem to be a country making their rules for the privileged and wealthy. So of course it makes sense to finally cut corporation tax, since few large companies pay it in any case. The plan will also generally lower rates for individuals which is a good thing as it puts more money in the pockets of ordinary Americans, which I hope we would all support.

There are significant drawbacks to the bill though, aside from the lack of detail with regards to income thresholds and other significant specifics. 80% of the tax breaks from this bill go to the top 1% by 2027, and the repeal of the estate tax is something that only benefits the very wealthy. Currently, the estate tax is only paid by those who have estates worth more than $5.5 million. Repealing this tax clearly only benefits the very well-off and it isn’t helping “ranchers and farmers” and Ted Cruz argued in his debate on tax reform with Bernie Sanders, but rather those who have property assets they’re leaving behind to children to inherit. The American Dream is about working your way up, not inheriting your way to the top without moving a muscle to earn it.

Adding trillions to the federal deficit is not a good idea in a time when the national debt is in excess of $20 trillion dollars. Eliminating state and local tax deductions is clearly mainly going to affect blue states where incomes are higher, a partisan move if ever there was one. However, corporation tax needs to be cut and income taxes should be cut for ordinary Americans. Even tax cuts on the top 1% could perhaps be justified if there were equivalent cuts in spending to compensate for the loss in federal income. But allowing the government to become bloated and indebted is a foolish move in the long term that will leave debt for our children and grandchildren to pay off. We should have a bipartisan plan to cut taxes on the middle and working classes and bring corporation tax to reasonable levels. But tax cuts that mainly benefit the richest in America to the tune of over $700,000 a year and eliminating the estate tax which only helps those with estates worth over $5.5 million dollars isn’t justified in the current climate. Sensible tax reform is possible, if Republicans take up the mantle of fiscal conservatism and Democrats are the party of working America.

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