Sunday Politcal Brunch: A Taxing Problem on Capitol Hill - December 3, 2017
Sunday, December 03, 2017
“A Taxing Issue” – The first thing to underscore is that the House and Senate are working on two very different tax reform bills. As always, they must pass the same bill before it can go to the President’s desk, so we’ll see. The goal of passing tax reform before Christmas seems like a “pie in the sky” wish, but there’s an outside chance.
“The Big Differences” – As mentioned, as with any bill in Congress the House and Senate must eventually agree on the exact same language. The Senate bill would completely eliminate deductions for state and local property taxes, while the House phases them out over time. The Senate bill would allow people to deduct all of their medical expenses each year, while the House would eliminate all of that. The Senate would keep seven income tax brackets; the House voted to have just four. There are more differences; these are just some highlights.
“Ask an Expert!” – There is a lot of hyperbole on both sides. Democrats call all these tax cuts that only benefit the rich and corporations (simply not true); and Republicans claim the “trickle-down theory” that a rising economic tide “will lift all boats” (also simply not true). Why do I say both sides are wrong? Well a lot of this depends on the final bill and individual circumstances. First, doubling the standard deduction and child tax credit will help a lot of families keep more of their own money. However, losing property tax and student loan interest deductions and medical deductions may hurt some of the very same families who choose to itemize deductions with a Schedule A. The best advice: consult a tax adviser, since generalized reports from the press are often an inaccurate “cookie cutter” approach that can be misleading. There’s no “one size fits all” analysis here.
“Market Reaction” – Since it has been 31 years since Congress passed major tax reform, the anticipation is palpable. On Thursday, the Dow Jones Industrial Average closed over 24,000 for the first time in history. The market surged by 351 points in anticipation of the Senate vote. Wall Street likes this issue, in terms of what it might mean for national economic growth. But as the ads always say, “past performance is not an indication of future returns.” Clearly, though, the investment markets are optimistic.
“Who Pays Taxes?” – Some of the rhetoric over tax reform is inaccurate and disingenuous. I don’t say this as any kind of endorsement of the current tax bills in the House and Senate. Instead it’s important to assess who is currently paying the U.S. tax bill. According to Pew Research, people who make over $200,000 per year, paid 59 percent of all income taxes collected by the Internal Revenue Service. Families making less than $30,000 per year paid only 1.4 percent of federal tax revenue. And according to the Tax Policy Center, 45 percent of U.S. families paid no income taxes at all in 2015. The notion that the “rich” don’t pay their fair share is simply blown away by these statistics.
“Why All of This Matters?” – We are now less than one year away from the 2018 midterm elections. Unlike other single district races in the past year, 2018 will, in fact, be a national referendum on the Trump administration and the Republican Congressional leadership. The Trump White House has had zero major policy initiatives get through Congress. It needs a win, and tax reform could be the ticket. Let’s face it, politics is a “what have you done for me lately” business. Even though they’ve neither passed (nor repealed) anything else of significance, if they can go home and tell voters they cut their taxes, it could have a big impact on the Republican’s chances in 2018. If they fail, it could be midterm bloodbath.
What are your thoughts on Tax reform? Just click the comment button at www.MarkCurtisMedia.com.
Mark Curtis, Ed.D., is a nationally-known political reporter, author and analyst, now based in West Virginia. He is the Chief Political Reporter for the five Nexstar Media TV stations serving the Mountain State, with additional viewership in Virginia, Kentucky, Ohio, Pennsylvania, Maryland and Washington, D.C.
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