It’s difficult for the average American to know exactly what’s up with the Republican tax-reform plans — and we likely won’t know until the Senate and House versions of the bill are blended into a single bill.
The word for such negotiations is “reconciliation,” in which one chamber of Congress tries to convince its counterpart that its plan is best.
There may, however, be a problem. And that is, if Congress doesn’t reach agreement on spending, the federal government faces a shutdown this coming Friday.
It’s both baffling and amusing that members of Congress have literally months and months to create policy, generally refuse to do so while arguing about meaningless political trivia, then make major decisions on the run.
If you owned a business and you managed it like Congress manages the government’s business, you’d be out of business in a nano-second.
But it seems clear the Senate and House will reach some compromises on tax reform, because there seems to be a big rush on getting the finalized bill on President Trump’s desk before Christmas, and we all know there are only a few shopping days left until Santa comes calling.
It seems unlikely the jolly, white-bearded, pleasingly-plump bringer-of-gifts on Dec. 25 will have anything pleasing for American taxpayers.
But it’s hard to say definitively, because the massive rewrite of U.S. tax regulations remains mostly a mystery. Even many Republicans in the Senate hadn’t seen a final version of the bill when they voted late in the evening last week.
But the bottom line of both versions of the GOP tax plan seems to be that a significant number of Americans will save a few hundred dollars a year on taxes, another group of higher earners will save roughly $2,000 a year, and those earning $175,000 a year and up will save an average of about $4,500 a year.
But the final version of the bill may have a serious flaw that even Republican spinmeisters may not be able to hide — giving millions of Americans a modest tax savings could end up increasing the federal debt by $1.5 trillion.
And here is the flaw, which may actually be more like a poison pill — Republican congressional leaders promise the debt will not be increased by the new plan. What they aren’t bragging about is how such a debt will be avoided. It’s really quite simple, in a few years, to eliminate the rising debt, taxes on most middle-income Americans will have to be increased.
And the true irony of that possibility is that while taxes will go up on lower and middle-income Americans, the reduction in corporate taxes will remain in place in perpetuity.
Senate Majority Leader Mitch McConnell claims the corporate tax breaks will result in more hiring, thus those tax savings will trickle down to workers.
Do you believe that? Many corporate CEOs apparently don’t believe it. At a recent gathering of executives, the moderator asked how many would use tax savings to hire more workers and increase pay of existing workers. Very few hands were raised. In fact, some major corporation leaders have said they will pass the tax savings along to shareholders.
The tax bill approved by the Senate last week runs more than 500 pages, and our guess is not a single senator has read the whole thing. No one in the private sector has read it, because the document was never made public.
Does this make any sense to you? It doesn’t to us. The 2018 mid-term congressional elections should be interesting.