Fruits of Tax Reform
January 18, 2018
Fruits of Tax Reform
Last month, we concluded an intense debate over tax reform, and I want again to thank Chairman Brady for heeding the concerns of those of us from over-taxed states like California. By allowing greater flexibility in deducting state and local taxes and by lowering ALL tax rates, the final measure assures that virtually every family will be paying lower taxes, even after losing much of their state and local tax deductions. In my district, the average household will see a tax cut of $1,900 as a result.
Yet I still receive many calls from constituents who fear their taxes will go up and their standard of living will go down. They believe this because this is what they have been told by the Democrats and by the media. But with the bill now taking effect, I believe people are about to see their paychecks grow, their job prospects brighten, and their family finances improve.
Indeed, the day President Trump signed the bill, companies across America began announcing bonuses, pay raises and major new investment plans in the American economy. And those announcements keep coming.
A variety of tax calculators are already available on the Internet so that every family can see for themselves how much they personally benefit from the tax cuts. I recommend a website called taxplancalculator.com. There, people can input their own tax figures and see how much their own family will save.
In February, withholding tables will reflect the newer, lower rates and the take-home pay for the vast majority of Americans will jump – even before accounting for the surge in wages that always accompanies an economic expansion.
By spring, most economists expect a significant burst in economic growth. As tax barriers come down, capital stranded offshore is already coming home. This morning, Apple announced it is bringing back most its quarter-trillion dollars now stuck offshore. Immediate expensing reforms will accelerate equipment purchases. And an internationally competitive corporate tax rate will mean new investments in making products in America once again.
If the New York Times poll from yesterday is any indication, the American people are already beginning to see the truth. That poll tracked an 18-point swing from disapproval to approval of the reform in one month.
The scaremongering by congressional Democrats went further than claims the tax reform would produce only middle-class misery and economic malaise. They also claimed that millions of Americans would lose their health insurance because of it.
How so? Because it removes the stiff tax penalties levied against 6 ½ million families who choose NOT to purchase over-priced Obamacare policies – a minimum of $2,100 for a family of four. Those families will now have that money available to meet their needs, including purchasing inexpensive policies available on the private market. And this begs two questions: If Obamacare is so wonderful, why must we force families to buy it? And if 6 ½ million families already prefer paying the penalty to buying the insurance, what does that say about the signature achievement of the Obama Democrats?
The Democrats have seized on projections the reform will add $1.5 trillion of new debt over the next ten years, based on their assumption it will produce no economic growth. Yet, when Ronald Reagan cut the top marginal tax rate by half, income tax revenues doubled. Several prominent economists are predicting an additional $2 trillion of new tax revenues to all levels of government solely due to economic expansion.
The final line of attack is that the personal income tax cuts will expire in eight years, leaving many Americans worse off. That’s perhaps the most dangerous argument for the Democrats to make, because every American understands the answer to that question depends upon who controls Congress. Democrats have made it clear that if they are returned to office, the tax cuts are over. And Republicans have made it just as clear that our unfinished business is to make the cuts permanent. Let the people decide.
Ronald Reagan asked a simple question both in 1980, when he ran against the economic malaise of the Carter years, and again in 1984, after he had implemented the same pro-growth policies we now see under Donald Trump. “Are you better off today than you were four years ago?” No politician or pundit can spin the answer to that question – every individual American knows it precisely in their own lives.
I am looking forward to asking that question again as the tax reforms take effect.