At 1:50 am Saturday morning, the Senate passed a massive tax bill without a full analysis of its impact. The bill:
- Favors corporations by cutting the tax rate they pay on profits (the corporate income tax rate) from 35% to 20%.
- Undercuts Obamacare by repealing the part of the law that requires people to buy insurance (the individual health care mandate).
- Lowers taxes for most Americans in the short term but dramatically advantages the wealthiest 5%. And tax cuts for the lower income half of all Americans disappear after 10 years, while the benefits to the wealthiest remain.
- Cuts federal alcohol taxes, which would reduce the cost of booze. Public health experts say this would also lead to 1,550 more alcohol-related deaths annually.
- Disincentivizes charitable donations by shrinking associated tax benefits.
- Doubles the amount of money you can give tax-free when you die, from $5 million we have now to $11 million (the estate tax). The change would reduce the number of people who pay the estate tax from around 5,000 to only 1,800.
- Adds approximately $1 trillion to the national deficit, adjusted for economic growth ($1.4 trillion without adjustments).
The bill isn't law yet. The House and Senate bills are different—the House also adds a crushing tax on PhD students, for example—so the two need to go through a conference committee process. Each house nominates members to negotiate, create and pass a conference report, which is sent back to both houses for a full vote before reaching the President.
Why is it important?
In case that list wasn't obvious, this bill would meaningfully restructure critical parts of the American economy, from health care to education to philanthropy to corporate business.
The bill, like every major Republican plans since President Reagan's 1981 tax cuts, rests on one central claim: that cutting tax rates for corporations and high-income individuals creates jobs and increases wages for everyone.
But experts say the bill would skyrocket the national debt, worsen income inequality, and usher in the collapse of Obamacare insurance marketplaces.
If passed, this bill will affect you.
Should Congress pass the Tax Cuts and Jobs Act?
This bill would increase income inequality, increase taxes on the lowest income among us, skyrocket the national debt, destabilize Obamacare and lead to 13 million more people with no health insurance, all to let the wealthy keep more of their money.
For the last 40 years, we have alternated between tax policies that increased taxes on corporations and high-income people and those that cut them. According to the Bureau of Labor and Statistics, income for middle-income households grew nearly twice as fast after tax increases than it did after tax decreases. Supply-side policies also resulted in higher national debt, which adversely affects the capital and debt markets to which businesses turn for funds to expand. This bill would increase the national debt by an astronomical one trillion dollars. Republicans' long-standing concerns about the national debt are pure fraud.
This bill would gut the health care millions rely on. By removing the individual mandate, it will cause premiums to go up. According to the Congressional Budget Office, 13 million Americans will lose their health insurance.
This bill will actively hurt everyone but a tiny, massively wealthy subset of Americans. It says something heinous about Congressional Republicans' values. It should never become law.
The changes this bill would make to our tax code are long past due.
First, we need low corporate tax rates to maintain a competitive economic environment for international business.
The United States has the highest top corporate tax rate among advanced economies and the fourth-highest in the world, according to the Tax Foundation. Bringing it down to the proposed 20% in the House and Senate plans, for reference, would put it just under the 22.9% world average. These corporate tax rates pose challenges for companies making business decisions about where to house their operations—operations that equal jobs, research and investment for American workers. High tax rates on individuals have a similar effect.
Second, we need a health care solution that Americans can afford and, as a first step, we should remove the mandate to buy insurance that they can't.
You may disagree about the cause, but Obamacare is falling apart. Premiums are increasing by 25% per year. One-third of all U.S. counties with only one insurer offering plans on their state’s exchange. And 34% fewer health care providers accepting Obamacare versus private insurance. If you don't want to buy insurance, under the Tax Cuts and Jobs Act you no longer face a penalty for your decision. It's about time.
- The full text of the Tax Cuts and Jobs Act
- "This bill amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses."
- The effect of the bill on income inequality
- "The bill is investing heavily in the wealthy and their children—by boosting the value of their stock portfolios, creating new loopholes for them to avoid tax on their labor income, and cutting taxes on massive inheritances,” Lily Batchelder, a New York University professor who worked as an economist under President Barack Obama, said. “At the same time, it leaves low- and middle-income workers with even fewer resources to invest in their children, and increases the number of Americans without health insurance."
- The effects of the bill on health insurance
- "If the individual mandate repeal does survive into the final tax bill, some experts expect that states that supported President Trump may face the worst outcomes. These states tend to have the weakest health insurance markets. Many only have one health insurance plan selling coverage. If that one plan decides it doesn’t want to sell in a marketplace without a mandate, it could leave residents with zero health options."