Congress recently passed, and President Trump signed into law, the most important and sweeping tax reform bill in over thirty years. President Trump says his intention was to give the American middle class a great Christmas present—a major tax cut. An excellent summary of the bill’s provisions can be found here: http://money.cnn.com/2017/12/20/news/economy/republican-tax-reform-everything-you-need-to-know/index.html?iid=EL
Actually, the bill won’t cut income taxes owed for 2017; it won’t go into effect until 2019 when its provisions will affect taxes earned on income in 2018. But some businesses, anticipating lower tax bills next year, are already giving Christmas bonuses to their employees, and everyone can review the new law’s provisions and learn how much of a gift the Donald has given him, at least in the short run. But even if we learn the Donald’s present to us is not as great as he says it is, its passage is still significant. It’s not his only achievement, but it’s probably his greatest this year. Given the gross incompetence of the congressional Republicans in bungling health care reform last summer, the fact they could pass anything as significant as the new tax law seems to be a Christmas miracle.
Of course, most Democrats don’t like the new law. They say that tax cuts for corporations and “the rich” are too big, and those for the middle class are too small. They especially don’t like the $10,000 cap placed on how much a taxpayer can deduct from his federal tax bill the amount he paid in state and local taxes. To allow taxpayers to deduct their state and local tax payments from their federal income tax bill is, in effect, to subsidize state and local fiscal policies. Since taxes and spending are usually higher in blue states than in red states, limiting the deduction will hurt blue state taxpayers more, requiring them to ultimately pay more state and local taxes to maintain more state and local spending—unless of course, they want to cut spending, which they don’t really want to do.
Come to think of it, all too many of us like tax cuts far more than we like spending cuts, and this attitude has gotten us into deep trouble at the national level. We continue to run multi-billion dollar deficits this year, and we have a national debt in excess of twenty trillion dollars. Critics of the new tax law—not only Democrats but impartial analysts as well–say it will increase the national debt by an additional 1.5 trillion dollars over the next year.
Naturally, the new law’s Republican defenders beg to differ. They say that additional—and as yet undetermined–cuts of a trillion dollars over the next ten years, coupled with the economic growth they say will be caused by the tax cut, will reduce its impact on the deficit and debt. But that remains to be seen. While it’s true that the Reagan- and Bush-era tax cuts were followed by economic growth, the growth was not great enough to produce enough revenue to balance the budget. To the contrary, the tax cuts, along with spending increases, increased deficits and accelerated the growth of the national debt. So the realization of the Republicans’ “rosy scenario” could be interpreted as a Christmas Miracle.
But maybe the probable growth of deficits and debt will prove to be no big deal. Republicans only care about deficits, the national debt, and balanced budgets when the Democrats are in power; then the Republicans can attack the Democrats for being fiscally irresponsible, as they did throughout the administration of President Obama. And the Democrats only promote fiscal responsibility when the Republicans are in power (when Obama was a senator he said that George W. Bush’s fiscal policies were not only “irresponsible” but “unpatriotic” as well). Otherwise, neither party really cares about fiscal responsibility one way or the other. Each party relies on the federal government’s unlimited power to borrow or print as much money as it needs. It almost seems as if there’s bipartisan agreement that one can spend what one doesn’t have, that one can accumulate debt which cannot be repaid, and that nothing bad will happen. Indeed, some might call the federal government’s ability to escape (so far) the fiscal and legal consequences of continuously spending more money than it has a Christmas miracle. However, I wouldn’t recommend that state and local governments, or private households, try to duplicate that particular miracle.
Of course, there’s always an outside chance that attempts will be made to rein in spending as well, but the prospects of that happening are not too great. Republican proposals to make cuts in Medicaid and Medicare payments to help reduce the deficit in light of the impending tax cuts are already being denounced; the Democrats may be able to attain political traction. In fact, while spending on Social Security, Medicare, and Medicaid make up over half the budget, there’s no realistic prospect that spending on these programs can be brought under control, or that taxes can be raised to cover increase spending, despite the fact that doing so is essential to restoring fiscal responsibility to the federal government. Indeed, acceptance of higher taxes and less spending as a means of promoting fiscal responsibility would indeed be a Christmas miracle.
I’m personally not holding my breath waiting for any of these Christmas miracles to take place. My own taxes will fall in 2018—Thanks! Donald—and I may well do my patriotic duty and spend every last penny of my newly acquired wealth. That’ll be my way of helping to expand the economy and promote fiscal responsibility.
Malcolm L. Cross has lived in Stephenville and taught politics and government at Tarleton since 1987. His political and civic activities include service on the Stephenville City Council (2000-2014) and on the Erath County Republican Executive Committee (1990 to the present). He was Mayor Pro Tem of Stephenville from 2008 to 2014. He is a member of St. Luke’s Episcopal Church and the Stephenville Rotary Club, and does volunteer work for the Boy Scouts of America. Views expressed in this column are his and do not reflect those of The Flash as a whole.