Be the Change #35 – The D+ Tax Bill

Sorry, but this one is pretty political  It’s a plea to call your member of Congress to ask for a better tax reform bill than the one they just introduced.

That postcard some Republican congress members are waving around is the best thing about the tax bill.  It’s true that, by raising the standard deduction, most taxpayers should be able to file their taxes on a single page, maybe even a post card.

But don’t think that raising the standard deduction means your taxes are going down.  In the current version of the plan, the $4000 personal exemption is going away, which nets it out for most families.   This bill offers almost nothing to the middle class. Some of us will see our taxes go down a bit.  For some, they will go up a bit. In aggregate, we are getting crumbs.

I was glad to see that the top tax rate isn’t being reduced.  With rising income inequality, the last thing this country needs is lower tax rates for rich people.  But the rich still gain from the bill in two ways.  First, the federal inheritance tax is being repealed.  The tax currently only applies to estates larger than about $6 million (for a single person) or about $11 million (for a couple).  So, repeal doesn’t help family farms and small business, as purported.  Only the super-rich benefit from it.

The Alternative Minimum Tax is also being phased out.  The AMT  is a brake on high-earners being able to reduce their tax bill with numerous large deductions.  So, only the well-to-do benefit from this as well.

Finally, the bill fails to do away with the carried-interest loophole, which benefits only hedge-fund managers.  Literally, hedge-fund managers will continue to pay a lower tax rate than teachers, nurses and policemen.  During the 2016 campaign, President Trump promised to do away with this outrage. He should make good on his promise by signaling to Congress that he will not sign a bill that does not repeal the carried-interest loophole.

Now let’s talk business taxes.  I’m not against lowering taxes on business, but this bill lowers taxes on big corporations, while doing almost nothing for small business.  It should do exactly the reverse.  I work for a big corporation, and it’s my bet that corporate tax breaks will mostly fund stock buy-backs and bigger executive bonuses. Small businesses are the big job creators.  They’re the ones who should get the tax breaks. 

But my biggest objection to this tax plan is that it will add $1.5 trillion to the deficit over the next ten years.    Now, while times are good, we should be paying down our debt, not running up more, against the day when another significant war or serious recession make deficit spending a necessity.  If we keep running up debt, we will eventually be face with horrific choices.  Cuts to defense (including Veterans Benefits), Medicare and Social Security will be inevitable.  Decades into the future, our grandchildren will be paying for tax cuts for the Mercers, the Kochs and the Trumps of the world. 

The tax bill is a D+ at best.  Send Congress back to the drawing board on this.  Call your representative and your senators, and insist that they come back with a bill that is deficit-neutral, and is targeted at the middle-class, not the rich.  Here’s a LINK to help you find contact information for your members of Congress.

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