Everyone hates taxes, right? I know I certainly do. You may not think so based on the title of this post, but I get it. As every American probably knows, the big move right now is to reform taxes. The President wants to cut taxes. The Republican House and Senate seem to be moving forward. I guess I'm just not sure: Why cut taxes? At least right now.
Does Anything Get Fixed With The New Proposals?
My biggest concern with what I'm reading is that things don't seem to get fixed. When I look at taxes, the problem I have is how arbitrary things are. You have, as an example, a $3,000 limit if you lose money on stocks. That's the most you can write off in a year. This is completely arbitrary.
Take the alternative minimum tax. That's been in place for decades. They always do a year by year change to exempt most people from it. Does the new plan get rid of it or fix it for good?
The rich currently benefit from the thousands of deductions and credits more so than any other group. It does stand to reason that if you make more money, you have more opportunities here. Still, ‘simplifying the tax code' was a rallying cry for President Trump. Is it going to get any simpler?
Business taxes are going to be cut under the new proposal. This is supposedly to attract or keep businesses in America. The thing is, I haven't heard a single business say that this would make a difference? Will it? Or will businesses simply pocket the money?
At the same time, businesses paying less are supposed to expand. In theory, taxes go down meaning there's more money. More money should fuel growth. Will this work?
The tax cuts are supposed to increase household income. But does this rely on businesses paying more from their tax savings? I'm not sure businesses will do that. More often than not, shareholders, not employees are rewarded.
These are just a few examples off the top of my head. And while I may have missed some details, I've not seen these things addressed. Are we really ‘fixing' anything so much as ‘changing a bunch of stuff'? And is that a good idea?
Does A Tax Cut Make Political Sense?
I'm kind of confused why Republicans are standing behind this. Polls show that most citizens have doubts about this. They seem to be pretty knowledgeable that the middle and lower class are not the primary beneficiaries. Yes, the ‘trickle down' effect is supposed to help them, but there's a lot of skepticism. With good reason, I would think.
So, I wonder why Republicans are standing behind this. People would love a tax cut. I'm just not sure the majority of voters will love this tax cut. If this passes, and people aren't happy about it, they'll take it out on politicians next November. After Republicans lost several key elections last month, this has to be worrisome.
But, it could be that they're screwed either way. After all, to be the Republican that says no to a tax cut, even a flawed one, could be used against them.
The Economy Is Bad, Right?
No, of course not.
Usually tax cuts happen when the economy needs a boost. Tax cuts happen to get us out of a recession. Or when growth is flat. But, we've been in a period of economic growth for practically ten years. It hasn't been fabulous growth, but it's growth nonetheless.
So, what's the motivation for the tax cut? And is it a good idea? After all, if we cut taxes now, what happens during the next eventual recession? A tax cut now will make it harder to play that card when it might be needed.
As I've said above, I would love to pay less taxes. I'm just not sure this is the way to go. I'm not in favor of any plan that puts the majority of cuts in the pockets of the rich. The middle class is losing pensions and pays more for health care. The lower class has a harder time than ever finding full time jobs. These are the people that need the help the most. Promising that the help will get there by first giving the savings to the rich is a bad idea. The rich show that they will likely use that money to simply get richer. They'll invest it. They'll save it. What they won't do is pass it down. At least, not as their first option.
And I've already made it clear my thoughts about the impact to the deficit.
So, the answer for me is a firm no.
Readers, what do you think of the tax cuts? Are they fair? Should we cut taxes at all? What changes would you make and what would you keep?