The really sad part about the tax bill that will pass this week is how much better it could have been. In normal times, a tax cut is used to stimulate a droopy economy which is not the case here. The hue and cry about how high the corporate tax rate is (35%) is disingenuous because most corporations pay a lower rate. In fact, if they really all paid 35%, a reduction to 28% would have been a 25% cut which should have thrilled everyone, but since they don’t pay 35%, a cut to 21% was necessary to be able to feel the difference.
While the authors of this bill like to talk about tax reform, it is really only a tax cut, with the bulk of the value going to the corporate interests. They have reduced the top rate a bit, but not back to the pre-Obama rate of 35% which you may recall was an absolute maximum which they could abide, even as the deficit climbed. Incidentally, you may have noticed that the deficit is now a Democratic talking point. The Republicans decided that it was an issue with little sizzle so they gave it to the Democrats who, lacking much vision, grabbed it immediately. The fact that both parties are deep in the river of hypocrisy on this issue is evidently not a problem for either party.
With the economy and unemployment in decent shape, they could have really done tax reform. By evaluating the impact of each exemption, personal and business, they could have decided which to keep and why, had it scored and then set rates to ensure the income necessary. That is what tax reform looks like. It isn’t easy and when it was last done in 1986, there were unintended consequences that didn’t’ work out well. What did happen was most people got a tax cut, some long standing inequities disappeared, and in the ensuing 30 years, many other inequities have crept back into the tax code. So, which ones were eliminated? Not carried interest which allows investment managers to pay at a 15% tax rate. Not lower rates for high income people; they were actually lowered. So where is the reform? We reduced the amount of state and local taxes that can be deducted primarily as a way to get tax money from residents of Blue states to keep within the deficit restrictions but, as I have noted previously, no one was bothered that the justification for this was totally political.
As we wallow through this bill which has just been made public, we should keep our eye on what is happening with the Mueller probe. As I noted months ago, I believe Mueller will be fired, along with Rosenstein, and who knows maybe throwing in Jeff Sessions for good measure. Maybe they can get the President’s new BFF, Lindsay Graham, to shut it all down before they give him the prize they are now dangling in order to keep him sitting at attention, the State Department. That is assuming there still is one once Tillerson finally limps out the door to redeem his stock options. Merry Christmas.