In a new series, Cash & Candor, Arkansas Money & Politics / AY Magazine Editor Caleb Talley aims to shoot it straight when it comes to business and politics in and around the Natural State. Talley comes to AMP by way of the Arkansas Delta, where he spent the last two years calling balls and strikes at the Forrest City Times-Herald. Read more Cash & Candor here.
This week, Republicans in Congress put the final stamp of approval on the most significant overhaul of the U.S. tax code in three decades. Three months ago, when President Trump and party leaders vowed to achieve their lofty legislative goal by Christmas, the opposition laughed. But on Wednesday, lawmakers sent the bill to Trump’s desk, making it his first legislative victory, nearly a year into his term.
Trump and congressional Republicans are cartwheeling their way into the holiday season. But the majority of Americans are skeptical.
In an NBC-Wall Street Journal survey, only 24 percent of Americans said they believe the tax overhaul is a good idea. In a recent CNN poll, just 21 percent said they would be better off. In just about every survey conducted this month, a plurality of Americans said they believe the middle class will actually pay more or be worse off.
So, what gives? Why are so many opposed to the idea of having more money in their pockets at the end of each pay period?
Perhaps the negative perception is a byproduct of Congress’s slapdash rush to pass the bill at any cost. Supports of the effort are quick to compare it to the landmark Tax Reform Act of 1986, but easily forget just how long the process took and how attentive lawmakers were in analyzing the bill prior to voting.
The last tax overhaul was passed in 1986, but the process began in January of 1984, when Reagan directed his Treasury Department to begin putting together a comprehensive tax reform plan. They produced a three-volume proposal by the end of the year, and a revised version with input from the White House wasn’t released until later in 1985.
Throughout 1985 and 1986, lawmakers considered every single aspect of the tax code and the various reform options presented to them. The House held 30 hearings to discuss the proposal. The Senate held 36. Debate alone lasted an entire month. As a result, the final bill passed with broad bipartisan support.
We are far removed from the days of thoughtful, calculated legislating. In an effort to give the president a much needed “win” before the end of his first year, congressional Republicans were in a heedlessly negligent dash to pass their bill. There were no hearings. There were no real debates. And there was little to no transparency.
And of course, nobody really bothered to read the whole thing. How could they? It was full of sloppy math mistakes. Entire sections were marked through, replaced with chicken scratch in the 11th hour. Pages of one-sentence amendments, handed down by Washington lobbyists, were added without much input.
What’s not to like?
And then there’s the whole issue of branding. Lawmakers insisted the tax bill was for the middle class. Anyone opposed it, they said, was opposed to helping hardworking Americans, the “forgotten man.”
This bill wasn’t written for the middle class. They were just throw-ins, something to sweeten the deal. It was written for big business. The corporate tax rate was slashed, permanently, by 14 percent. The rest of us are likely to see marginal cuts over the next few years, but they’re only temporary. In fact, the individual tax rate cuts expire in 2025, after which lower-to-middle income families will actually see an increase in their taxes, compared to current rates.
But the tax bill, I believe, will become more popular with time. The best thing going for Trump, Mitch McConnell and Paul Ryan is very low expectations. The only place to go, now, is up.
It should, because the bill will lower taxes for 8 in 10 Americans. Only 5 percent of wage earners will pay more next year, and those will be wealthy folks living in places with high local taxes. I imagine a lot of people will begin to come around when they get that first paycheck of the new year and see a few extra dollars. It won’t be much, but $50 is $50.
And thanks to a little public outrage, some of the ideas floated out by ornery Republican lawmakers didn’t make it in the final bill. Tuition waivers remain in place and employer tuition assistance won’t be taxed like income. Student loan interest deductions stay in place, as does the work opportunity tax credit for young workers. And the child tax credit expands.
The cuts to businesses, too, could have a positive on the economy, as long as increased revenues trickle down to workers. Corporations like AT&T have vowed to give their more-than 200,000 employees a $1,000 bonus. Comcast promised the same for its 100,000 employees. Wells Fargo plans to raise its minimum wage up to $15 an hour.
But that’s entirely up to the them. Some companies, like Coca-Cola, Cisco and Pfizer, have said they would rather use additional revenue to enrich shareholders. At least they’re honest.
Tax reform may be Trump’s Christmas gift to America, but whether it’s the gift that keeps on giving remains to be seen. We won’t know the real impact of this bill until much further down the line, after individual cuts expire and the deficit continues to climb. The onus, now, is on corporations to grow the economy by investing in their workers and creating more job opportunities.
But we’ll worry about that next week. For now, enjoy that eggnog.