by Kate Harveston
In these days of political turmoil and intensifying partisan divide, it’s difficult to keep track of the facts. Corporate-owned media outlets on both ends of the political spectrum market their material as unbiased and factual, all while distorting reality for the sake of profit. As a consumer and concerned citizen, it’s frustrating to hack through the distortions and blatant disagreements of both sides — and resignation or full-on disillusionment often seems like an attractive option.
In some cases, this way of thinking is especially dangerous. A wise man once wrote that there are only two sure things in life: death and taxes. If we are to take this wry remark as fact — and, indeed, there is a ring of truth to it — then we are to understand taxation impacts each of us inevitably and unavoidably. We can’t and shouldn’t ignore any changes to our taxation because it dictates our lifestyles and quality of life — now and into the future.
With all this said, the Republican Party’s tax reform bill has passed both the House and the Senate and now awaits joint revision sessions and a presidential signature. Both of these final steps are expected to proceed without a hitch. Widely unfavorable reviews herald its passing — two of three respondents found it undesirable — and it has been criticized by many media outlets and economic professionals.
This is not “fake news.” This bill is legitimately harmful to the average citizen. Here’s why.
Corporate Over Personal
One of the most significant misconceptions surrounding this bill is another mutation of the standard Democratic criticism of Republican legislation: it favors the wealthy at the expense of the poor and working-class. This is true to an extent but doesn’t do proper justice to the scope and focus of the bill.
Where past Republican legislation has favored wealthy individuals and households in addition to corporate giants, the 2017 reform bill takes this philosophy one step further. The reforms punish everyone. In some areas, affluent, middle-class and lower-income families will fork over similar amounts, if not more, than they’re currently paying. In some cases — particularly in high-tax “blue states” like California and New York — the cost of living is readjusted, ballooning the potential taxation for citizens.
This isn’t to say the top echelon won’t see benefits from this bill. Most of those dwelling in the upper 1 percent remain heavily invested in corporate business of some kind. Those who have ties with or ownership of big business will see significant benefits, despite the potential for higher taxes in some states. However, those wealthy individuals who are still wage-earners — doctors, for instance — may end up paying more.
On the flip side, corporations will be given massive tax cuts, calling back the glorious days of Reaganomics — until everyone realized trickle-down economics doesn’t work and never will. Many critics of the bill have pointed out the problem with taxing the consumer and benefiting the corporation: who will drive the supposed economic growth? The logic seems simple: large companies have much more market power than the average, or even collective, consumer.
However, money still needs to cycle for corporations to grow, and consumers are the means for us to achieve this so-called “velocity of money.” If you raise individual taxes, you punish the company, the economy and the consumer alike.
Beyond Republicans’ traditional hatred for personal taxes, this bill is also uncharacteristic for another glaring reason. Many figures have been tossed around by economists and number-grinders, but one takeaway is increasingly apparent: if the tax reform bill passes, our budget deficit will increase. The Congressional Budget Office calculated that the bill would raise the current budget deficit by roughly $1.7 trillion over the next decade and by even further in years to come.
The 2018 budget deficit sits at $440 billion — nothing to sneeze at — and has been steadily increasing since the ‘90s. We shouldn’t assume tacking on another $1.7 trillion — more than four times the current amount — will give a proper estimate for 2027, as much of that will be paid off through various other means.
But the fact remains: barring miracles, this bill will put our country on worse financial footing than it is now. Remember: Republicans claim to be deficit hawks and “fiscal conservatives.”
The tax reform, intended to cut spending, also heavily targets those reliant on insurance and Medicare. The plan calls for cutting $473 billion from Medicare, a program covering 55 million Americans today. If that isn’t enough, the budget also provides for cutting a further trillion, jeopardizing any of the millions who rely on our social safety net.
The citizens most reliant on this system are those most in need of government support: the sickly, the disabled — especially in impoverished communities — and the elderly. Individuals covered by Medicare are some of the most vulnerable people in the U.S. and will face incredible hardships following the adoption of these reforms. People are going to die because of this.
As of December 1, a version of the bill passed through both the House and the Senate. Some legislation — a compromise between both versions — will be signed into law. A few questions remain: while the House bill would alter the existing income tax brackets, the Senate version would not. Other discrepancies include increasing child tax credits for high-income families, taxes on foreign business and a repeal of the Obamacare insurance tax.
Medicaid and Medicare are hit by both versions of this bill, so this is expected to translate into the reconciled final version. Both versions of the bill will also see a significant increase in the federal deficit and automatic corresponding cuts to Medicare.
Overall, both bills will provide a tax break for everyone in the immediate future — more for high-income than low-income families. By 2021, though, the low-income earners of $30,000 or less will actually pay more. In the following years, this cost will creep up to those making $40,000 and then eventually to everyone. This is because the tax cuts are temporary and will be removed by 2025, while changes to other factors remain.
This bill is not in our interest as a country. It is an illogical, rushed and, frankly, crappy piece of legislation. But what else would we expect from the Trump admin, eh?