The Republican Congress and Trump administration are to be commended for embarking on a difficult quest to reform the muddled U.S. tax code, simplifying it and giving middle-class Americans a nice tax cut.
To their credit, members of Utah’s congressional delegation are supporting and participating in this initiative that can give the U.S. economy a big boost. Sen. Orrin Hatch is in the thick of the debate.
The tax reform effort is in the phase when anyone can take shots at it and find fault. Democrats and liberals have taken advantage of the opportunity and are describing the Republican effort in doomsday terms.
Don’t believe them. It isn’t nearly that bad. In fact, Congress is on track to enacting an excellent reform package that will be good for the economy and for most Americans. The Senate and House plans differ, as is to be expected. They will need to compromise and adopt the best features of both plans.
The critics always claim that wealthy people will benefit most from the Republicans plans. But the authoritative nonpartisan Joint Committee on Taxation says that under the Senate plan, taxpayers earning between $20,000 and $30,000 would get a 10.4 percent income tax cut; those earning between $50,000 and $70,000 would see their income taxes decline by 7.1 percent; millionaires would get a 5.3 percent tax cut.
Certainly, in raw dollars, a millionaire getting a 5.3 percent tax cut gets to keep more money than a low-income person getting double the tax cut. Thus, critics say it’s a tax cut for the rich. But remember that wealthy people pay most of the taxes and higher percentages of their income in taxes.
IRS data show that the top 10 percent of income earners, those with adjusted gross income over $138,031, pay a whopping 71 percent of taxes. That means about 1.7 million Americans, less than 1 percent of the population, pay 71 percent of income taxes. Is that fair?
The other 90 percent of taxpayers pay less than 30 percent of income taxes. The bottom 50 percent of income earners pay only 2.83 percent of federal income taxes. Some 37 million tax filers have no tax obligation at all, and that number will grow under the Republican tax plans. Some 45 percent of households will not pay any federal income taxes this year, according to the Tax Policy Center.
The critics are also complaining about reducing the corporate tax burden. But corporations, especially small businesses, provide jobs, goods and services. Only hardcore leftists want to penalize corporations with high taxes – which, of course, are passed on to customers. High corporate taxes mean higher prices for goods and services and fewer jobs.
Good tax reform and simplification will also mean changes in deductions and exemptions. Different people are affected in different ways, giving critics another line of attack by taking the changes out of context. A taxpayer may lose a deduction, but still get an overall tax cut because of other changes. It isn’t fair to judge the whole product by one feature. One has to look at all the changes and balance them out.
It’s highly hypocritical for leftists to complain about tax cuts for the wealthy and then defend millionaire New Yorkers with a penthouse overlooking Central Park who might lose a portion of their property tax deduction.
Another criticism notes that lower taxes might increase the federal debt. The Democrats and liberals aren’t at all concerned about running up deficits by creating new government programs or increasing spending on existing programs. They propose such things every day.
The Republicans acknowledge that cutting taxes will increase the debt. But more money will be left in the hands of consumers and businesses with a resulting economic boost – and more tax revenue. That has happened in the past.
I don’t like increasing the deficit. But I’d rather do it by cutting taxes than by spending more on big government programs.
The most important question of all is how tax reform will impact the overall economy. I might lose a little or win a little in tax reform. But I’m willing to live with the impact on me personally if it means an overall stronger economy, more jobs and a better America.