Debating public policy is fair game. Whether or not we should build a wall on our Southern border will have diverse perspectives and warrants discussion. In the new tax bill whether Congress should have eliminated the provision for carried interest is a reasonable discussion. Demagoguing the issue and outright lying to the American people about the bill that is now law is plainly contemptible.
Demagoguing may be a means to score political points, but punishment should be meted out by the voters. Minority Leader Nancy Pelosi (D-CA) has made many negative comments, calling the bill â€śmonumental, brazen theft from the American middle class.â€ť She goes on to state the bill â€śraises taxes on 86 million middle-class households.â€ť Yes, that is correct when (and if) some of the provisions phase out eight years from now â€“ two presidential elections and four Congresses from now when most likely Ms. Pelosi will be retired as an 85-year-old.
In the meantime, even the left of center Brookings Instituteâ€™s Tax Policy Center states 80% of Americans will receive a significant tax cut.
How that will happen pops right out if you look at the tax bill. For most Americans, because Congress raised the standard deduction significantly, they will also be the ones for which the words â€śtax simplificationâ€ť will have real meaning. How this will happen:
Letâ€™s say you are truly a middle-class American. You will no longer have personal exemptions, but the standard deduction you will have is now $3,200 more than the prior standard deduction and personal exemption for you and your spouse combined. Combine that with reduced tax rates and you are a tax winner.
Letâ€™s say you have taxable income of $70,000. On about $50,000, the tax rate was reduced by 3%.That means a $1,500 tax reduction. Then because your standard deduction reduced your income by $3,200, you save another $96 bringing you to a savings of $1,596.
Letâ€™s say you are the model American family and have two kids, aged 10 and 14. You would lose the personal exemptions for them costing you $1,215. But now your child tax credit goes from $1,000 to $2,000 per kid. That means an extra $785 in your pocket added to the $1,596, which means a tax savings of about $2,381. And if your tax is wiped out by the tax credits, it is fully refundable (the government writes you a check) for up to $1,400 per child.
So, letâ€™s review. You live in Kansas and both you and your spouse work. You bring in about $95,000 from your two incomes and you have two kids. You will have about $2,400 less to pay in taxes in 2018, not to mention a much simpler tax return to file saving you hours of time and a fee from H & R Block to file it.
That seems like middle class tax relief to me. Why would Senator Bernie Sanders (Socialist-VT) describe it as â€śa disaster,â€ť â€śone of the great robberiesâ€ť and a â€śmassive attack on the middle-classâ€ť? It will be a rare example of a middle-class person with or without children not having a tax savings from this bill. I cannot figure one. As for it being â€śone of the great robberiesâ€ť â€“ that can only be that Senator Sanders thinks all your earnings belong to the government and the tax system only allows you to keep some of that money through the goodness of our elected officials. I have not found what specifically Mr. Sanders would want to do to improve the bill for the middle-class. He just attacks the plan without explanation of how he would enhance the plan.
As for higher-earners, the ones in no- or low-tax states will do well under this bill, but most live in high-tax states. Part of the reason they earn more is to offset the high cost of living in places like San Francisco, New York and Chicago which includes the very high taxes in the states where they live that are virtually no longer deductible.
My colleagues and I have begun to work through our high-earner clients and the various scenarios they live under. Tax-wise they are screwed and tattooed. There are some provisions in the law that will possibly help them, but not many.
If you work for Disney and make a $1,000,000 salary you are going to pay more. Your mortgage interest will be potentially reduced, your excessive property and state taxes will be limited to $10,000 and your employee business expenses will no longer be deductible. Your tickets for Lakers or Dodgers games will no longer be deductible. Your $5,000 contribution to USC for those choice football game tickets (no longer deductible) will no longer be treated as a charitable contribution. Their top tax rate goes down 2.6%, but that does not nearly offset all the new taxable income.
Tell me how people like this make off like bandits?
If this tax plan works, this is what will happen:
1. Because we now have competitive corporate tax rates with the rest of the world, many positive changes will occur. Our companies will stop moving to Ireland with their 12.5% tax rate. They will bring billions back into the United States remembering we are the center of the capitalist world and have the best workers in the world. Companies in England, France or Kuwait will open or expand operations in the U.S. creating more jobs here because we will no longer have the highest corporate tax rates in the world.
2. More Americans will be working and making more money and thus paying more taxes. Remember these are tax rate reductions; not tax reductions. If the government collects more money, then taxes have gone up. After the tax rate cuts of 2002, in 2006 the federal government was collecting $700 billion more per year.
3. Because the economy is doing better more people will be working and less will be on our various welfare programs helping reduce government outlays at all levels.
4. The highly-successful people will more than offset the increased taxes they will pay because they will make lots more money and pay even more taxes.
I suggest we all take a deep breath and stop the fighting. This negativism coming from the Democrats needs to stop. The bill is passed and the only way they can win this argument is by making the points outlined above not come to fruition. That will hurt every American, including the middle class they state they have such high concern for protecting.
We should all be cheering for Americans to succeed, not telling them they are going to fail. Two years from now you can tell me I was wrong, if I am, but donâ€™t try to make me wrong. That is just unacceptable demagoguery.