Con­ser­v­a­tives need to unite around Trump | Wiki­media Commons

The GOP House lead­ership released its new tax plan last Thursday. Fol­lowing the Oba­macare repeal fiascos of the spring and summer, this bill, known as the “Tax Cuts and Jobs Act,” marks the latest attempt by Repub­lican law­makers to prove they are capable of gov­erning effec­tively in the wake of Pres­ident Donald Trump’s inau­gu­ration.

The main fea­tures of the current plan include:

1) low­ering the cor­porate income tax from 35 to 26 percent.

2) con­sol­i­dating the seven current tax brackets into three brackets of 12, 25, and 35 percent.

3) dou­bling the standard deduction and expanding the child tax credit while elim­i­nating most other indi­vidual deduc­tions.

4) grad­ually abol­ishing the death tax over six years.

At first glance, this plan appears ben­e­ficial — cleaning up and sim­pli­fying a messy tax code while also low­ering the cor­porate tax rate to a more rea­sonable level with respect to other indus­tri­alized Western coun­tries (Germany’s national rate is only 15 percent). Upon closer inspection, however, the White House’s claim that these will be the “largest tax cuts in history” rings hollow.

This bill is more of a deduction cut rather than a tax cut. Although most Amer­icans will have their tax rates reduced, they will end up paying more in taxes overall because of the loss of many important per­sonal deduc­tions.

Under the pro­posed tax plan, as pre­pared by the House Ways and Means Com­mittee Majority Tax Staff, the sim­plified rates and dou­bling of the standard deduction will reduce federal rev­enues by $921 billion over 10 years. But at the same time, by elim­i­nating most of the per­sonal deduc­tions cur­rently available, rev­enues will increase by $1.5 trillion over that same period — nearly a $600 billion increase.

A pos­sible expla­nation for such an increase is a desire by Repub­licans to “pay” for the cor­porate tax cut by increasing per­sonal tax revenue. Even if this expla­nation is inac­curate, the Repub­lican con­gres­sional lead­ership, while pre­tending to be inter­ested in cutting taxes, seems decidedly dis­in­ter­ested in cutting gov­ernment spending.

A few par­ticular examples illus­trate how the elim­i­nation of most deduc­tions will harm American tax­payers, par­tic­u­larly those in the middle to lower income ranges.

First, the new bill will elim­inate medical deduc­tions. If elderly persons or couples living on fixed incomes are forced to move into assisted living which costs $50,000 a year, they are able to write most or all of that off on their tax return. Under the new plan, no such deduction will be available.

Second, the current pro­posal caps the property tax deduction at $10,000, which means people living in high-value areas will be able to write off only a small portion of their property taxes. When Con­gress intro­duces this cap and the Federal Reserve raises  interest rates — which looks increas­ingly likely — property values nationwide will likely be severely damaged. This, in turn, will incen­tivize more people to rent instead of buy because they are likely to get little return on investment by way of increased property values, dam­aging the sluggish real estate market.

Third, the tax plan will elim­inate deduc­tions for casualty losses. Cur­rently, tax­payers can write off cat­a­strophic losses, such as house fires or rob­beries, for any­thing above 10 percent of their income. Without this deduction, people who lose their home and do not have insurance will be left out in the cold.

Lastly, the sug­gested tax bill pro­hibits anyone from writing off Health Savings Accounts on their returns. This is intriguing because it directly con­flicts with the Repub­licans’ sup­posed desire to repeal Oba­macare. Rather than encour­aging people to put money into one of the better alter­na­tives to gov­ernment-sub­si­dized healthcare, the Repub­lican plan actually dis­in­cen­tivizes spending on private healthcare.

By proposing a reform package that elim­i­nates nec­essary deduc­tions for mil­lions of middle-income and lower-income fam­ilies, the Repub­licans, whether through sheer incom­pe­tence or willful intent, are causing Amer­icans to pay more in spite of lower rates. If this bill is what is required to show that Repub­licans can govern, as some nor­mally-con­ser­v­ative mouth­pieces have argued, then it is perhaps time for voters to con­sider whether or not the cost is too high.

This vio­lation of trust on behalf of Repub­licans toward their base should not be taken to mean they are cozying up to the rich at everyone else’s expense. In fact, the pro­posed plan actually raises taxes on the rich by leaving the door open to a new addi­tional rate of up to 46 percent (an increase from the current max rate of 39.6 percent) for indi­viduals making upwards of $1 million and couples making upwards of $1.2 million. These top earners include not only the Warren Buffets and Hol­lywood elites of the world, but also a large number of American small business owners, whose enter­prises provide col­lec­tively more than half of our country’s jobs.

In addition, this rate does not include state income tax, meaning that small business owners in states like Cal­i­fornia or New York could be paying well over 50 percent of their income to state and federal gov­ern­ments. Rather than cutting taxes across the board for everyone to drive growth — as hap­pened during the Reagan years — Repub­licans intend to raise taxes on the richest Amer­icans, which is both harmful to the economy and incon­sistent with the party’s declared oppo­sition toward “tax policies that delib­er­ately divide Amer­icans or promote class warfare” in the 2016 GOP platform.

While there are good ele­ments to the tax plan — most notably the slashed cor­porate tax rate — there is no excuse for the Repub­lican-con­trolled leg­is­lature and exec­utive branch to not sep­a­rately pass the good parts. The reason all of this is being bundled together into a behemoth-sized piece of leg­is­lation is because Repub­licans want to hide from the American people their refusal to reduce the size of gov­ernment.

This is not tax reform; it is giving with one hand and taking with another. Repub­licans want to clean up the tax code around the edges rather than fun­da­men­tally change the way it operates.

By cutting the cor­porate income tax in an attempt to return American busi­nesses to our shores and jump-start the economy, Repub­licans simul­ta­ne­ously have taken no sub­stantive action to address bloated gov­ernment spending and the massive debt. This is not going to work. If the Pres­ident and the Repub­lican estab­lishment in Con­gress really want to have the “biggest tax cuts in American history,” they need to quit with the smoke and mirrors.


Joshua Waechter is a sophomore studying history.