Congressional republicans achieved one of their top priorities today by passing a massive, and not particularly popular, tax bill. In the short-term, it offers huge tax breaks to corporations and wealthy individuals, and smaller tax cuts to low- and middle-income people. After ten years, corporations would retain their tax breaks, while taxes on most Americans, except the very wealthy, would go up. Fiscal conservatism appears to play no role in this bill; it is projected to drive our nation’s budget deficit even further through the roof. Overall, this bill fails to uphold Common Ground’s basic principles for reducing annual deficits and federal debts:
1) Uncontrolled growth in federal debt is a serious threat both to our economic stability and our national security, for our generation, for our children, and for our grandchildren.
The tax bill will not reduce the federal debt. On the contrary, it will increase the debt by more than $1.4 trillion. (Visit Fix the Debt to learn more about why the sky-high national debt endangers our future.)
2) Long-term reduction of federal debt requires a comprehensive plan to stabilize debt as a share of GDP, implemented gradually over time to minimize the impact on economic growth. AND
3) Comprehensive plan must address every area of the federal budget without exception, including defense spending, Medicare, Medicaid, Social Security, and operations of the federal government.
A comprehensive plan must address every area of the federal budget without exception, including defense spending, Medicare, Medicaid, Social Security, and operations of the federal government. The tax bill is not being coupled with responsible spending cuts. It does eliminate a number of business deductions and credits, but the savings found in those eliminations does not pay for the overall cost of the bill. Further, we should not be cutting the budget to finance tax breaks for corporations and the very wealthy; we should direct savings toward reducing the debt.
4) Eliminating business subsidies will reduce the level of federal debt.
This bill does not eliminate business subsidies, most of which are addressed in spending bills rather than the tax bill. In fact, the tax bill reduces corporate taxes dramatically, so companies and industries that benefit from corporate welfare will be paying an even lower portion of their fair share.
5) Long-term debt reduction also requires changes to the Internal Revenue Code to broaden the tax base, eliminate all but selected tax expenditures, and raise revenue to reduce both annual deficits and the federal debt.
The tax bill does not broaden the tax base, nor does it raise revenue — on the contrary, it adds massively to the national debt. It does eliminate most business deductions and credits (with some notable and costly exceptions, like the research and development credit and the low-income housing investment credit), but the math doesn’t quite work. According to the right-leaning Tax Foundation, the corporate tax rate will decline to 21% from 35%, leaving a budget gap. Deduction and credit eliminations will only provide enough tax revenue to fill a portion of that gap; they will provide enough revenue to lower the corporate tax rate to only 28.5%. Nothing else in the bill makes up for that additional 8.5% difference.
Notably, the bill does decrease the deduction for mortgage interest, a provision which disproportionately benefits wealthier people who are more likely to own homes. Lowering this deduction of interest — now on mortgages of $750,000, down from $1 million — is a step in the right direction toward making the tax code more equitable, but the positive impact here is lost amidst huge giveaways to corporations and the very wealthy that come at the expense of most Americans.
6) Curtailing the growth of federal debt is consistent with protecting the needs of citizens who are truly disadvantaged. We can refine and preserve benefits for the people who need them most.
This isn’t a spending bill, so there aren’t changes to federal spending on programs that help the poor. However, this bill is far more generous to corporations and wealthy individuals than it is to low- and middle-income taxpayers.