Early Positive Effects Of Tax Reform Law Counter Democrats’ Fearmongering
President Donald Trump signed the tax cuts bill into law just before Christmas, making the Christmas holiday weekend a little brighter and cheerier for the vast majority of Americans who live paycheck to paycheck.
The new law’s positive effects have already begun. Last week, Boeing, AT&T, Wells Fargo, Fifth Third Bancorp and Comcast (among others) announced they will direct part of their tax cut savings to employee compensation, including four-figure bonuses and substantial raises. The dozens of small business owners I talk to on a daily basis are similarly finalizing plans to hire, raise wages and expand as a direct result of the tax cuts.
This tax cut reality is starkly different from Democrats’ fearmongering rhetoric. Oregon Sen. Jeff Merkley called the tax cuts “the biggest bank heist in history.” House Minority Leader Nancy Pelosi called the tax legislation “the worst bill in the history of the United States Congress.” She also called it “the end of the world” and “Armageddon.”
The Hamlet line: “The lady doth protest too much, methinks” comes to mind here.
Zero Democrats voted for the tax bill, which will eliminate federal taxes on the average family of four earning $50,000 and halve them for the family earning $75,000. This is Exhibit A in the transformation of the party of John F. Kennedy from the one that cared about paychecks to the one that cares about partisanship.
The Democrats base their “tax cuts for the rich” narrative on an analysis by the George Soros- and Tom Steyer-funded Tax Policy Center, which claims 83 percent of the tax cuts go to the top one percent.
At first, this finding sounds striking, but when you actually read – rather than parrot — the report, you find that the only way Democrats are able to draw this conclusion is by assuming that tax cuts on working- and middle-class Americans will expire.
In the real world, no Congress would ever let this happen. Even the pro-tax Obama administration made President George W. Bush’s temporary middle-class tax cuts permanent in 2013.
So what is the real distribution of the tax cuts by income group? Well, according to Tax Policy Center data, most of the tax cuts in proportional terms — in terms of share of income taxes paid — go to the middle class. The tax bill significantly reduces the middle class’s share of taxes paid, while actually increasing the rich’s tax share.
In other words, the tax bill makes the tax system more progressive, meaning the wealthy pay an even greater share of the nation’s taxes. Don’t expect the media to discuss this inequality narrative.
How does the tax bill accomplish this? It offers numerous provisions that directly help working and middle class families. For instance, it doubles the zero tax rate for American families to $24,000.
It doubles the child tax credit to $2,000, meaning the average American family with children will save between $2,000 and $3,000 a year on this provision alone.
And the bill eliminates the 15 percent tax rate which currently kicks in on families’ first $18,650 of taxable, income in favor of a 12 percent rate that extends all the way to $77,400 – saving middle-class families thousands more dollars per year.
And these are only the direct income gains from the bill. These gains don’t include the raises and bonuses of the likes seen this week by major companies. The bill’s new 20 percent tax deduction on small business income will allow entrepreneurs to keep more of what they earn to help their businesses, employees, and communities.
As these positive effects continue to be felt, opponents will be forced to at the very least dial down their rhetoric and potentially even support the bill. Otherwise they risk looking like the Grinch who tried to steal Christmas tax cuts.
Alfredo Ortiz is the president and CEO of the Job Creators Network. He has held management positions at CSM Bakery Products Nestle, Pepsico and Kraft.