While the past week has been dominated by outraged mainstream media news coverage of Pocahontas and Trump‘s supposed “anti-Muslim” tweets, the GOP scored a major victory with its tax bill, which passed the Senate by the slim 51-49 margin. The bill has done what one would expect in the era of hyper-polarization of our politics; delighted the right and infuriated the left.
The first major change: an enormous cut in America’s corporate tax rate, which was among the highest in the world. At 35% it was once higher than that of many of the Scandinavian “welfare states” that the Bernie Sanders crowd so loves to champion. Now the corporate tax rate will be lowered to 20%.
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Next: tax rates and tax brackets. Here the Senate and House versions differ, with the Senate bill maintaining 7 brackets, while the House bill lowers the number of brackets to 4. The bill will need to proceed through the process of reconciliation in order to reach President Trump’s desk.
Under the terms of the House bill, which I am hoping becomes the final version of the text, there would be 4 tax brackets at 12%, 25%, 35%, and 39.6%. Income up to $45,000 would be taxed at only 12%, a major win for the working class and middle class. Income up to $200,000 would be taxed at 25%, while income up to half a million would be taxed at 35%. Incomes above half a million would be taxed at the highest rate of 39.6%.
Another key component of the bill: lower tax brackets across the board, but fewer deductions will be allowed, which leads to a great result for the American public: simplification of the tax code. Now, more Americans than ever will be able to fill out and file their own forms, without the help of a professional tax preparer or accountant.
Indeed, Tony Nitti writing at Forbes, claims that well in excess of 90% of tax filers will now simply claim the standard deduction (the amount that a taxpayer can write off automatically from their gross income, before taxation kicks in. The standard deduction for both single and married filers has now doubled:
“By doubling the standard deduction from $6,350 for single taxpayers/ $12,700 for married filing jointly to $12,400/$24,800, while simultaneously gutting the majority of itemized deductions, it is estimated that roughly 94% of taxpayers will claim the standard deduction in 2018. Thus, while high-income taxpayers will be pillaging the opportunity left behind by the revamped Code, many lower-income “W-2″ filers will be basking in its newfound simplicity, confident enough to prepare their own returns now that it doesn’t require totaling itemized deductions on Schedule A.”
This is what most Americans want. A simple tax code. A fair tax code. A code that tries to treat all income equally, and spares us the headaches of complicated forms featuring mountains of time-consuming itemization of deductions. In general, the American public would be thrilled with a bill, such as this, that would afford the vast majority of Americans the ease of preparing their own tax return in an afternoon.
The left and its zombie army on social media, has been quick to paint the tax bill in apocalyptic terms: financially reckless, unfair to the working class, and a massive giveaway to the rich. It is projected to add $1.4 trillion to the deficit over the next 10 years.
Financially reckless? Well, the American Left had little to say as they watched Obama add nearly $10 trillion to the deficit over the course of 8 years. Seems they don’t see the blatant double standard here.
Unfair to the working class? Working class single filers will now be charged no tax on their first $12,400 of income. That sounds pretty good to me. Additionally, they will only pay 12% on income up to $50,000; thus…An American who earns $50,000 will have a total federal income tax bill of $4,512, or an effective tax rate of 9%. This is hardly the “punitive” or “devastating” bill for the working class that leftist commentators have made it out to be.
Returning to Nitti, whose commentary on the bill is largely negative, he raises a nuanced argument regarding its effects on the poor. While he concedes that technically the poor are not losers under the bill, he cites the repealing of the dreaded “individual mandate”, requiring all Americans to buy minimum health coverage, as an ultimate detriment to the poor and working class.
Because now that the federal government can not force individuals to buy into a health insurance plan, poor and young and healthy people will flee the expensive market, driving up premiums, and costing the poor more for their healthcare.
This is a pretty weak argument. The poor and working class receive massive subsidies from state and local governments for their healthcare anyway. Someone who is making $20,000 or $30,000 a year is certainly not going to be able to afford any of the ObamaCare plans without massive subsidization anyway.
There is absolutely no Constitutional justification for obligating American consumers to buy health insurance. If premiums are going to rise because 13 million Americans, of their own free will, choose to go without health insurance, then that is the fault of the unprecedented interference of the Obama administration in a free market economy.
It is fundamentally dishonest to suggest that Americans are hereby “losing” their health insurance; they are choosing to not buy health insurance. That is their choice. They want to lose their health insurance. The American public has been so misled by the mainstream media, that they have largely bought into this image of Americans being forced at gun point to “lose” their healthcare.
The exact opposite is true. The state is trying to use the threat of force to obligate Americans to buy goods and services in a free marketplace. That is an outrage.
This is a win for the American economy, and it is a win for libertarians. Lower taxes, simplified tax code, and a repeal of the individual mandate. Trump has something to cheer about.