Archie: The Truth About the GOP’s Tax Law (from someone who’s actually read it)

 

We’re coming up to April 15 tax day again -- actually April 17 this mid-term election year -- and Republicans will try to make hay out of its new tax law. We know it didn’t work in the recent special election with Democrat Conor Lamb’s success in the strong Republican district of PA-18, and it won’t work for the GOP in the 2018 midterms.

I’ve spent much of my career working in the private sector on complicated tax issues. Unlike GOP politicians trumpeting the new tax law, I’ve actually read it. As a tax attorney, I must understand how the various parts of the new tax law work together. As a Democrat running for Congress, I must describe a complicated new tax law to voters truthfully.

Unlike GOP politicians trumpeting the new tax law, I’ve actually read it

Only Republicans voted for the new tax act in December 2017. Even so, I admit parts of it are good (i.e., increasing the standard deduction, addressing the problem of foreign income stashed overseas by corporations, and reducing tax rates). Parts of it are bad, however, with disproportionate results between corporations and those who work for a paycheck. Americans have the basic common sense to know that the new tax law, taken as a whole, is fundamentally flawed.

Even so, Republicans want to put lipstick on this new tax law and use it in their 2018 campaigns. By now, we’ve all heard GOP politicians tell us how the new tax law is the reason for “fatter paychecks.” Yes, the new tax law has resulted in larger after-tax paychecks for some people, to varying degrees. However, the new tax law does so much more, much of which is being ignored by the GOP and much of which will be harmful to all of us. American voters, with their collective common sense, know this.

Under the new tax law, wage earners are now the least favored class of taxpayers, while corporations, businesses, and investors get big tax breaks.

  • Republican leaders simply ignore the fact that the new GOP tax law encourages investment on foreign soil rather than in the U.S. Under the new law, certain corporate overseas earnings are exempted from US tax. US corporate employers now have US tax reasons to build new manufacturing facilities overseas.

  • The Republican fatter-paycheck soundbite ignores that under the new tax law, wage earners are now the least favored class of taxpayers, while corporations, businesses, and investors get big tax breaks. Wage earners get much smaller tax rate reductions that are not permanent (unlike corporations), and wages continue to be subject to both income tax and social security tax—it’s a raw deal. Wage earners squeaking by week-to- week on their paychecks are now, as a systemic matter under the Internal Revenue Code, the least favored class of taxpayer.

  • The GOP also wants to overlook that the new law will substantially add to the deficit. Ultimately, our children and grandchildren will shoulder this burden through higher taxes or by reducing funding for the GOP’s favorite whipping boys, namely Medicare, Medicaid and Social Security. All the while, the US will be paying more and more interest to debtholders, which include China and other foreign governments, as this problem worsens.

  • The GOP rushed the new tax law through with too little consideration of complex, interdependent issues resulting in ill-considered consequences. The so-called “grain glitch” is one example that was fixed in the recent 2018 omnibus spending bill. If not fixed, the grain glitch would have created drastically different tax results between farm cooperatives and non-cooperatives, in turn, causing substantial dislocations in farming businesses. Other unintended consequences from the tax act will be discovered given the GOP’s rush to pass the tax act with lack of attention to detail.

It’s reported the GOP wants to address some of the public concern about the new tax law by undertaking a “Phase 2” to make individual tax cuts permanent (like the corporate tax cuts). The GOP couldn’t do that in December 2017 because of deficit and budget constraints. If Phase 2 proceeds, then the GOP will completely disregard deficit concerns in a ploy to force Democrats in a box to either vote against permanent individual tax cuts or vote to blow another hole through the deficit. The GOP’s Phase 2, if it proceeds, will likewise fail the American people’s “smell test” and US voters with their common sense will see through this ploy as they’ve done with the fatter paychecks soundbite.

Ultimately, our children and grandchildren will shoulder this burden through higher taxes or by reducing funding for the GOP’s favorite whipping boys, namely Medicare, Medicaid, and Social Security

We can expect to hear the “fatter paychecks” soundbite from GOP candidates again and again this election year. Politicians too often talk in soundbites telling voters only what they want them to know. “Fatter paychecks” is a half-truth at best and Americans know in their guts they are being misled.

I believe the tax code should be an extension of our moral code and we should collectively make moral choices about the sharing of the burden of government. Talking in soundbites and trying to force “take it or leave it” choices to embarrass the other party are causes of our government’s dysfunction. We must stop this. We must do better.