By: Schondra Aytch
As House Speaker Paul Ryan is in full effect preaching the new proposed tax plan to major manufacturers throughout the U.S, his equally upbeat gusto for Republicans being “on the same page” is hardly believable. Divisions within the GOP’s efforts to replace Obamacare have only intensified since and with many speculating for this tax plan to fall short, there is much for the Republican majority in both the House and Senate to prove. With a $4.1 trillion budget passed on Thursday, October 3rd and more than a few Republicans opposing it during the vote, bringing all the Republicans together for the application of the tax reform proposal looks hazy.
While the major goals for the GOP’s tax reform plan is to lower tax cuts and eliminate tax breaks, they seem to have forgotten that their plan must be revenue neutral. President Donald Trump wants to decrease the corporate tax rate from 35 percent to 15 percent; an effort that would lower tax revenue by over $2 trillion. Also, President Trump’s effort to reduce tax brackets from seven columns to three (33 percent, 25 percent and 12 percent) would assist in our Treasury losing another $2 trillion. House Republicans, which did agree on dropping corporate tax to 20 percent, have yet to establish corresponding income levels for the slimming down of individual tax brackets.
On the bright side, there is some effort by the Republican Party to benefit the lower and middle class with an increase to the standard deduction. This not only makes filing taxes simpler, but it leaves little tax liability to low-income Americans. Still, this is bittersweet as it relates to the battle to eliminate itemized deductions. Itemizing deductions ensures tax breaks for mostly higher earning Americans like small business owners and real estate agents. This could be complicated if these higher income folks use money from their tax breaks to increase business.
Considering the effect of itemized deductions; House Republicans have proposed a special tax rate specifically geared towards mom and pop shops. Small businesses tend to file through the top tax rate of the individual side of the tax code, which is currently over 39 percent. With the GOP’s new tax rate for these businesses at 25 percent, it’ll hopefully assist small businesses in growing. Bigger, wealthier financial companies also try to pass through the individual side which takes money from the small companies who need it. Still, this drop in the individual tax rate for small businesses is an effort to attract more people to take advantage of it, thus creating more businesses.
With many details not specified, critics find it hard to compute how the House Republican’s tax plan will affect the economy. Even in the GOP’s strategy to come up with revenue raisers, it is based much on the theory of “economic growth.” For example, Republicans believe that cutting corporate tax will provide big corporations with more money to hire more people, thus increasing employment and business. This is only true if those corporations utilize their new sum of money to hire more, instead of giving bonuses and raises to executives. Even if large corporations maximize their profits, will there be enough economic growth to cover the rumored $5.6 trillion that will be added to our federal deficit? To lower American tax revenue that is supposed to replenish the debt, while increasing American debt makes it impossible to make this fiscal year debt neutral.
With much of the bill lost in translation, it leaves many to think that the opposition between conservatives and moderates during the GOP’s Health care reform has flooded into the attempts made for a solid tax plan. Outspoken house members like Sen. Rand Paul (R-KY) and Sen. Ted Cruz (R-Texas) who ran for the Republican nomination during the 2016 election have been skeptical of what the proposed tax framework could entail.
Sen. Rand Paul who is focused on “cutting taxes for all” had this to say during writing a Breitbart Op-ed, “I don’t want to vote for a plan that cuts some taxes but raises them on others, especially not on the middle class. So I want everyone to see the errors in their plan, look for solutions, and come together for a plan that can pass,”
This is a hard task especially considering that it is a unique time for the GOP, who has majority rule in both the House and Senate; something that hasn’t happened in ten years. Sustaining incentives for big businesses from moving overseas, while simultaneously providing breaks to the growing number of lower and middle class Americans is a tedious goal. It seems that the Republican Party has bitten off more than they can chew.