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).
4 comments:
Someone needs to remind the GOP of the debt counter they kept bringing up while Obama was President. The party is known for its "fiscal responsibility" yet exacerbating our debt and increasing the income equality gap is what they decide to do when our inflation is low. I smell a recession being cooked up.
One problem that I see with Trump and the GOP is that although Trump ran as a Republican, he doesn't actually share many values with the Republican party. One of the main values that he does share with them is the idea of tax cuts that favor the rich. Because this is one of the main values with which Trump and the GOP can agree on, I foresee hard tax cuts in the future of Trump's presidency and lots of opposite movement from the direction that Obama took. What I'm trying to say is that tax cuts are going to become common, huge, and possibly uncompromising now that we have a Republican dominated government which will suck for about half of the nation.
I'm going to have to agree with previous commenters in that these tax cuts are a net loss for the American people. Thanks to the quasi-deification of Reagan in modern conservative politics, there is an unshakable mentality of "tax cuts! Tax Cuts! TAX CUTS!" and the baseline assumption that these cuts create greater economic growth is a given to many of these congressional republicans, but there is very little proof for this. As Claire already alluded to, the benefits of supply-side economics are temporary if not nonexistent, and a move to appease one's base ought to be weighed against the greater impact on the country. As Josh said, the rampant increasing of the debt seems very hypocritical and detrimental to the country.
The belief that tax cuts will stimulate the economy is outdated. In the 1980s under Reagan many claimed that tax cuts worked will and that trickle down economics would help the overall economy. However, we are now in a globalized economic system, where wealth will not trickle down to the average American. It is not possible that adding to the country's debt and cutting down on programs like education and health care will actually help people. Severe tax cuts for the rich will only stunt the country's ability to provide aid.
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