As the Senate moves into the homestretch on its tax cut legislation this week, here are five fast facts you should know:
1.) The Senate bill cuts marginal tax rates across the board. This is undoubtedly superior to the House bill, which de facto raises the top rate with its “bubble tax,” increases the marginal rate for filers in the 33-percent bracket to 35 percent, and keeps the current 39.6 percent top rate on the books. The across-the-board rate cuts in the Senate bill give supply-siders a nice win to celebrate if this gets to the finish line.
2.) Unlike the House bill, the Senate bill would repeal Obamacare’s individual mandate. While I would love to see Obamacare completely repealed (Cigna just informed me my premiums will massively spike next year), the fact that we are this close to eliminating the beating heart of Obamacare is no small feat. Relief from Obamacare is back from the dead!
3.) The Senate and House bill will both cut the the corporate tax rate to 20 percent — which a big win for economic growth, as I have explained here, here, and here. This provision will make us more competitive internationally and lead to higher wages for workers.
4.) The liberal media has thrown out a massive red herring to try to derail the Senate’s tax bill. As you may have read, a lot of the tax cuts in the Senate bill are set to expire in 2027, meaning filers could be paying more a decade from now. As I have written before (in bold letters), there is no such thing as a permanent tax cut. 2027 is two presidential elections from now, and a lot can and will change. The reality is all tax cuts must be defended every single year after they are enacted. Reagan already showed us that no tax cut is ever permanent, so don’t buy into the media’s 2027 “taxmageddon” scare tactic.
5.) However, one area on the Senate tax bill that does require scrutiny is the rumored “revenue trigger.” The Senate is possibly adding a provision to its bill that would automatically raise taxes should revenue projections fall short. The problem? If revenue estimates are falling short, it naturally means the economy is faltering. Raising taxes in a weak economy is a recipe for recession — this is one of the few economic areas where Keynes and Hayek both agreed.
Tax cut legislation is moving closer to the finish line — let’s hope the GOP will stick to pro-growth economic policy as the final details get ironed out!
Photo credit: 401(K) 2012 via Flickr, CC BY-SA 2.0