The President’s tax reform bill will have positive results for our families and businesses
Senate and House Republican negotiators have agreed about the terms of the first significant reform of the US tax code since the days of President Ronald Reagan. A lot of grassroots conservatives are asking whether this reform is worth their support.
The answer to their question is a strong yes. The Tea Party Patriots conducted a series of surveys three years ago focusing on our supporters where they sought to find out the issues that were of the highest priority to them and how they wanted us to solve them.
A considerable number of them put tax reform near the top of their priority list, but they disagreed on the exact method to be used when reforming the tax code.
A lot of them wished for some type of flat tax while others favored the fair tax. But practically every one of them agreed on three simple aspects of tax reform.
First, reform ought to simplify the code and make it fairer and flatter. The size of the tax code has grown by 300% in the past 30 years and currently over $400 billion and 6 billion hours are spent annually just to comply with the inordinately complicated code. All that money and time goes to waste. It is necessary to simplify the code.
Second, reform must lower taxes. Already the government takes too much of our hard-earned money. Reforming the tax code should enable us retain more of our earnings.
Thirdly, tax reform should spur economic growth. We should stop fumbling along and assuming that a paltry growth rate of 2% is satisfactory. The right tax reform will stimulate investments, savings and work, and this will create economic growth which translates to more jobs and better pay.
The negotiated tax law fulfills these three requirements to the letter. Removing or minimizing several loopholes simplifies the system. Increasing the standard deduction will encourage more taxpayers to go for it instead of itemizing their deductions. This will further simplify the system.
The bill reduces the corporate tax rate by 14% (from 35% to 21%) and also cuts the individual taxes. It leads to a system that is flatter than the previous one. The congressional scorekeepers reckon it will generate a $1.5 trillion tax reduction in the course of the next ten years.
By significantly lowering the corporate tax rate and making the US to be one of the lowest corporate tax rates in the developed countries (previously it had one of the highest in the developed world), investment inflows to the US companies should increase. Investors and business people will return money to our country, productivity will rise and this will improve economic growth. The end result will be the creation of new jobs that pay better.
A number of our supporters are wondering why we were supporting laws that scorekeepers say will increase our national debt by $1.5 trillion in the next ten years. That is a good question.
First, we disagree with the scorekeepers. We are convinced that the pro-growth elements of this tax reform will generate considerable economic growth, and this growth will create extra revenues for the federal treasury that far exceeds their projections. They do not have a good track record. For example when scoring the 2003 tax cuts by President Bush, the Joint Committee on Taxation predicted huge reductions in revenues. But in actual fact from 2003 to 2007, federal tax revenues exceeded what the Joint Committee on Taxation had projected by $434 billion.
The second point is that we feel our country will have higher chances of solving our debt crisis as and when the economy starts to experience a sustained growth rate of 3% and above .The difference in growth rate between the Obama years (2%) and the Reagan years (4%) works out to around 5 trillion less revenue going to the federal treasury in the course of ten years. We must grow the economy at a faster rate so as to raise the flow of revenue to the federal treasury and reduce the gap between revenues and expenditure which is manifested as the debt and deficit.
The third point is that we think spending bills ought to be spending bills and tax bills to be tax bills. We will keep on supporting the Penny Plan as a way of reducing spending and balancing the budget in the course of five years.
The fourth point is that in our view, the government’s problem in reducing the gap between expenditure and revenues must not be an excuse for maintaining high taxes. We support the endeavor to let taxpayers retain more of their hard-earned money.
The fifth point is that we are grassroots-oriented, and we consider the input of our local leaders and activists before making any decision to support specific bills and issues. This was done at the beginning of this process.
The sixth and last point is that our Yellow Card Project backed tax reform as a means of getting a simpler code that lowers tax rates and stimulates economic growth. This is what this tax reform bill will do. Therefore we will encourage Congress to back this bill and send it to President Trump to be signed into law.