This Thursday, the Senate passed a budget for fiscal 2018. The House must create its own budget and the two budgets from the houses will be compared and compromised on in order to create the finalized budget for 2018. The tax reforms that Republicans aim to implement will determine how they obtain the budget, and many Republicans are hopeful that this will be the start to their promised tax reforms, and framework for these tax reforms has been announced. After the failed attempt to repeal the Affordable Care Act, successful tax reforms are extremely important for approval rates.
This framework “calls for just three tax rates -- 12%, 25% and 35% -- but allows for the possibility of a fourth,” which is a large simplification of the seven current tax brackets. The issue is that this would decrease the government budget, and is “expected to increase the deficit by $1.5 trillion” over ten years (Barret and Mattingly). This new plan would increase the tax rate on the lowest bracket by 2%, which for the cap income for this bracket would mean an additional $186.5 lost to taxes, which most likely would’ve gone to necessities. It also means that for each person earning the lowest income for the highest tax bracket, the government will collect $19,246.44. Republicans hope that this amount saved by the rich will be put back into the American economy.
However, examples of previous tax cuts have shown that they don’t always stimulate the economy. For example, Bush’s tax cuts “added 1.7 trillion dollars to the national debt over 10 years.” In addition, Louisiana’s governor Bobby Jindal supported the largest tax cuts in the state’s history. Currently, “Louisiana’s budget shortfall is projected to reach $1.6 billion next year and to remain in that ballpark for a while” (Dreher), and Jindal, who refuses to raise taxes, took millions out of funding from health care and higher education. According to Representative Patricia Smith, “We’re going to end up placing fees and all kinds of things on ordinary citizens, just so Jindal can say on the presidential campaign trail that he didn’t raise taxes,” meaning that citizens will still have to make up for the budget shortfall even though Jindal didn’t raise their taxes.
Even though the Republican tax reforms and Louisiana’s tax system aren’t the same, I believe that Louisiana’s situation paired with past national tax cuts make a strong case that they don’t create lasting stability. In Louisiana and during Reagan’s presidency, there was a (relatively) brief surplus of money which eventually crashed. While the framework of the tax reform is not terribly drastic to my understanding, it still cuts down government revenue a lot, which means that the government will have to cut funding from certain programs (likely health care and possibly education). I understand why people who believe in a smaller government would support tax cuts, tax cuts can create debt that only an even bigger government than what we currently have (FDR's New Deal expanded government to proportions it had never been before, and even though that debt wasn't caused by tax cuts, the solution is big government and tight regulations).
