Senate Republicans managed to remember that they’re supposed to be conservative just in time to pass a sweeping Tax Reform bill during the early morning hours of Saturday. The bill passed on a 51-49 nail-biting roll call, with Sen. Bob Corker (R-Tenn.) as the only GOP no vote.
The passage of the bill, called the Tax Cuts and Jobs Act, means that President Trump is one step closer to fulfilling a key campaign promise. The legislation’s key features include a massive overhaul of the tax brackets, and the tax levels, each of which is decreased.
Democrats have been crying wolf over this bill saying that it’s meant to serve only the wealthiest Americans. This is despite the fact that the bill actually creates a new top bracket that will tax the wealthiest income-earners an extra 5-6% than they are currently. It also prohibits high income-earners in the richest states, California and New York, from deducting their state and local taxes from their federal returns.
The main feature of this Reaganesque measure is a reduction of the corporate tax rate from 35% to 20%. Currently, American businesses face the largest tax burden of any others in the developed world. Republicans explain that these cuts will enable businesses large and small to compete against those in other countries.
In a desperate attempt to maintain their narrative, Democrats insist that lowering the corporate rate will simply allow CEO’s and executives to pocket more of their company’s earnings. The argument harkens back to the flawed logic of Keynesian economics, which doesn’t work in the real world. It assumes that the top money-holders simply stuff their earnings into their mattress and stop it from going back into the economy.
It turns out that wealthy businesses and their owners contribute the most to the economy through investment. If it wasn’t for large investments, no small business would ever get off the ground. No entrepreneur would ever achieve the American Dream. Capitalism hugely incentivizes taking risks with your money rather than letting it sit in the bank.
The Democrats believe that taxing wealthy income-earners and corporations will generate more revenue for the government, where they’d then presumably help needy Americans with the funds. But, the more taxes befall a wealthy individual, the more they will either ship their money overseas or simply earn less because there’s an incentive to do so, being that the government will take less of your money.
In addition, they believe that taxing corporations will somehow raise wages for workers. Of course, logic dictates that the opposite would happen. Corporations aren’t their own entities, they’re made of people. The company’s income is already taxed through income taxes on wages, why should they be double-taxed through an arbitrary corporate tax?
This legislation is a step in the right direction, but it must be combined with several other deregulation measures to ensure that the money at the top can flow downwards. Capitalism will work well-enough, but it has to be backed-up by deregulation. Companies will always try and make the most profit, and if they view government as the avenue to obtain it, then they’re obligated to take advantage of the law. If government has fewer levers on the economy, then businesses will have no choice but to compete with each other. Lastly, the re-patriation rate must be reduced to 0% so that wealthy Americans can bring their money back to the US without being taxed so that they can fully invest it in our economy.
The Tax Cuts and Jobs Act, having been passed by both chambers of Congress, will now head into conference where one single bill will be crafted from the House and Senate versions. The bill will then return to the House and Senate for a final vote before heading to the President’s desk. Congressional leadership is optimistic that these steps will be accomplished before Christmas this year.