The Tax Cuts and Jobs Act: Debunking President Trump’s Only Accomplishment
The recent signing of the Tax Cuts and Jobs Act represents the first real fulfilment of one of President Trump’s campaign promises. While delving into whom it will benefit, the immediate circle of the President as well as big American corporations appear to benefit from this bill. In contrast, the real losers of this bill are Trump’s middle class voters.
After an unsuccessful attempt of repealing and replacing ObamaCare earlier last year, the Republican Party (GOP) finally achieved their first major legislative win since President Trump took office: the Tax Cuts and Jobs Act was passed into law.
The highlights of this bill include a $1 billion tax cut for corporations over the next decade, decreasing the maximum tax rate, doubling child tax deductions, and virtually removing the estate tax. This bill changes taxes on all income earned after January 1st, 2018. The first time people will see the effects of this tax cut is in 2019, because that is when 2018’s income is taxed.
This bill has been sold as a massive tax cut that would benefit all Americans and not just the wealthy; however, most individual tax cuts will expire in 2026. At the point of expiration, tax rates will actually increase. By 2027, Americans in the lowest 20 percent income levels would have a higher tax liability. Minority leader Nancy Pelosi called this bill a tax scam and “monumental, brazen theft” in her speech on the House floor. She has criticised Republicans saying that they are not standing with their constituents and that helping the middle class has never been their goal. Chuck Schumer, the Senate Minority leader has also criticised the bill by saying “there is no reason a single person should pay more when every single corporation is paying less.”
This bill is also highly criticised, because of its high cost, which is estimated to be $1.46 trillion. This was highly hypocritical of Republicans in Congress since their main argument against universal health care has always been that the nation cannot afford going into that kind of debt; however, they are now willing to increase the deficit to pass a tax cut that will enrich GOP lawmakers, their donors, and the President’s family.
Republicans continue to insist that this will pay for itself by growth of the economy; yet, in a recent interview Speaker Paul Ryan revealed the uncertainty of the repercussions of this bill by saying that no one can know if it will pay for itself. If the Republican theory is wrong and this bill does not pay for itself, the deficit will increase by trillions of dollars and this will be left for future generations to deal with.
Essentially this tax bill will exclusively benefit the rich, so how is the GOP defending it? Unsurprisingly, they are using the Trickle Down Theory in order to justify the content of this bill. This concept was most famous during the era of the poster-President of the Republican party: Ronald Reagan. Dr. Arthur Laffer, the founder of this theory, often refers to the economic boom under Reagan to prove his theory but this does not take into account the monumental increase in federal debt, and still has not been proven to benefit the middle class.
The International Monetary Fund released a report in 2015 regarding the Causes and Consequences of Income Inequality in which they specifically warn about trickle down economics saying that benefits of the rich do not actually trickle down into the economy. In this study the IMF also demonstrates that the rich getting richer usually results in a decrease in GDP.
President Trump has talked about this bill from the beginning of this campaign, and continued to make it his priority through his first year in office. Many were cynical about a wealthy president passing a tax cut and he was highly criticized by the media because of this. In September, President Trump addressed these doubts in a rally in Indiana saying, “I am doing the right thing and it is not good for me. Believe me.... My plan is for the working people, and my plan is for jobs. I don’t benefit.”
Although it is impossible to know specifically how much this could benefit the President since he is yet to release his tax returns, estimations were made in November 2017 based on his last public tax return of 2005 by tax expert Maury Cartine. According to these estimates, if Trump were paying his 2005 taxes under the current tax bill, he would save more than $31 million just from the abolition of the Alternative Minimum Tax. The President’s net worth is estimated to be $2.86 billion according to Bloomberg, this would mean that his children would greatly benefit from the new increase threshold on the inheritance tax. Cartine also estimated that the President will save up to $1.1 billion under this bill by 2024.
In conclusion, President Trump is right: this bill is truly an incredible accomplishment. It is an accomplishment for his family, his donors, and American businessmen. The only real losers here are Trump’s middle class voters who continue to blindly support his policies without truly understanding their repercussions.
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