Trump’s Triumphs #3 - Tax Reform -- The first significant reform since 1986.
Although the Republican Party had to be dragged kicking and screaming into it, President Trump has managed to sign into law the first significant tax reform since 1986. While not quite the tax relief conservatives hoped for, it was still a significant achievement given the Swamp’s antipathy to the conservative agenda and all things Trump.
As of the State of the Union Address, something on the order of three million workers have received bonuses thanks to the tax cut. That number has been reported as high as five million. What Nancy Pelosi labeled, in Marie Antoinnette fashion, as “crumbs” is significant money to most Americans - so much so that, even here in San Francisco, the local ABC news created a poll asking how tax payers intend to spend the windfall. This act indicates first that some members of the mainstream media elite realized their audience cared about the tax cut and second that if they didn't comment on it their viewers might lose confidence in their version of the news or, worse, like something Trump did.
Highlights of the tax reform include: 1) the scrapping of the individual mandate on health insurance, 2) the corporate tax rate is coming down to 21% - from 35% - bringing companies back into the US and leaving more funds for hiring and expanding 3) the amount of money exempt from the estate tax has been doubled from 5 to 10 million, saving thousands of small businesses and farms, at least until 2026.
By eliminating the individual mandate, the bill seriously cripples Obama-care, which is already floundering, and restores individual choice for health insurance, as well as ends the dangerous policy of government forcing individuals to purchase something against their wills.
Bringing the corporate tax rate down encourages investment in American companies and encourages American companies to stay home and keep their money in our banks. The most talked about example is the Apple Corporation's reaction to the bill. The New York Times reports “Apple, which had long deferred paying taxes on its foreign earnings and had become synonymous with hoarding money overseas, unveiled plans that would bring back the vast majority of the $252 billion in cash that it held abroad and said it would make a sizable investment in the United States,” building an iPhone chip plant in Texas.
Although less revenue does threaten to increase the national debt, couple the reform with strategic slashes to the federal budget and the debt should go down. Plus, with more companies able to afford to hire, more taxpayers will contribute to the system, rather than depend upon it. The Heritage Foundation estimates the economy will grow 2% over 5 years.
As for individuals, even those who haven't received a bonus from their companies are likely to benefit. From 2018 through 2025, the legislation reduces federal individual tax rates. The top tax bracket is reduced from 39.6 percent to 37 percent, and most other taxpayers will see their federal tax bracket reduced by one to four points. The thresholds for the lower brackets are also increased. However, because the state and local tax deduction is limited to $10,000 the combined effective marginal tax rate for many upper middle and upper income taxpayers, especially those in high-tax states, will increase. Ideally, citizens of the high-tax states will see the benefits reaped by citizens of the low tax states and state governments will feel pressure to lower taxes. Of course, here in California, which is pretty much a one-party state, our government is sadly immune.
For families, the bill has mixed reviews. While the standard deduction is nearly doubled, personal independent exemptions are repealed. The child tax credit, however, “is doubled to $2000 and up to $1400 dollars per child is refundable– paid even if no taxes due.” (Heritage)
The mortgage interest deduction remains intact, except for home debt over $750,000. Though Californians may suffer from this, the bill encourages homeownership in the center of the country. Anyone with relatives in"flyover country" knows the vast disparity between real estate prices in California or New York versus Ohio or Nebraska. While the Left talk ad nauseam about ending the disparity between the rich and poor, its policies and regulations are what has caused this chasm. Perhaps the bill will shrink the gap as it encourages companies to build and expand in the heartland.
So, while the tax reform bill isn’t exactly a conservative dream come true, it still can be listed as a Trump Triumph because so many in both parties stood in its way. The force of Trump’s personality, his skill as a negotiator and his rapport with the American people could not be dismissed by his adversaries. Now, average citizens have seen (again) that Washington truly doesn't have their best interests at heart, and they have a little bump in their weekly paychecks to remind them who does.