This week, Republicans in the House and Senate passed the most comprehensive tax bill in the past three decades. This marks the biggest change since Reagan signed the 1986 tax reform.
Tax rates will drop for corporations and for individuals, allowable deductions will be changed and Americans will no longer be required to choose between buying health insurance or paying a fine.
“Under the final tax bill, the corporate tax rate would fall to 21 percent, from the current 35 percent, a move that Republicans are betting will increase economic growth, create jobs and raise wages,” wrote Thomas Kaplan and Alan Rappeport in the New York Times article, “Republican Tax Bill Passes Senate in 51-48 Vote.”
“Individuals would also see tax cuts, including a top rate of 37 percent, down from 39.6 percent. The size of inheritances shielded from estate taxation would double, to $22 million for married couples, and owners of pass-through businesses, whose profits are taxed through the individual code, would be able to deduct 20 percent of their business income.”
Currently, companies that bring cash to the United States from overseas profits pay up to 35 percent of that repatriated money in taxes. This bill lowers the tax rate to 15.5. percent, a move that is projected to increase the amount of repatriated money and to result in more U.S. jobs and higher growth. The upside potential is tremendous: Apple alone has $250 billion sitting overseas.
Because of budget rules that prevented deficit projections from increasing after a decade, the tax cuts for individuals would expire in 2026. In anticipation of the victorious House vote, Speaker Paul Ryan, R-Wis., proclaimed, “Today, we are giving the people of this country their money back.”
President Trump tweeted out his joy Wednesday at 1:09 a.m., “The United States Senate just passed the biggest in history Tax Cut and Reform Bill. Terrible Individual Mandate (ObamaCare)Repealed.”
Ryan also announced his excitement and congratulations to Senate Majority Leader Mitch McConnell, R-Ky, via Twitter, “Great news — The Senate just passed the Tax Cuts and Jobs Act. After years of work, we are going to enact the most sweeping, pro-growth overhaul of our tax code in a generation.”
But the rejoicing was confined to Republicans. House Minority Leader Nancy Pelosi, D-Calif., protested the bill, calling it “simply theft — monumental, brazen theft from the American middle class and from every person who aspires to reach it.”
Senate Minority leader Chuck Schumer, D-N.Y., voiced his displeasure on the floor of the Senate, “We believe you’re messing up America.”
According to Gallup polling released this week, “66 percent of Republicans, [and] 14 percent of Democrats say cuts would help family’s finances, 82 percent of Republicans, [and] 11 percent of Democrats say cuts would benefit U.S. economy.” (poll conducted Dec. 1-2, 1,020 adults, 95% confidence level, +/- 4 points).
Schumer’s comment that “this tax bill will be an anchor around the ankles of every Republican” may foreshadow next year’s campaign strategy by Democrats, who will constantly and consistently talk about how horrible the bill is for the American people.
The chairman of the Ways and Means Committee, Rep. Kevin Brady, R-Texas, predicted that experience will trump rhetoric. “I frankly think Democrats have overplayed their hand, because when people back home and our local businesses see the tax relief, they’re going to know they weren’t really told the truth by the opponents of tax reform.”
The Republicans might believe this, but they should also be concerned that rhetoric often overshadows and changes voters’ perception of reality.
After the Senate’s passage of the bill, Majority Leader Mitch McConnell, R-Ky., said, “If we can’t sell this to the American people we ought to go into another line of work.” If the Republicans are not careful, this could come true.
The passage of the bill was a must-do for Republicans, and they delivered. But there is little time for relief. Early in the new year, the government spending shutdown deadline must be navigated, and in March, time runs out to fix Deferred Action for Childhood Arrivals. However, with a major legislative accomplishment under their belt, Republicans have reason to believe that their newfound momentum will carry into 2018.
Their next step should be to communicate constantly and consistently to the American people how the tax reform benefits them. To do this, they would be wise to remember that it’s not just the message but also the messenger that counts; imparting information is not enough to achieve real communication. For that to occur, both parties must receive it, understand it and agree to it.