Despite the significant opportunity to improve America’s tax code, the current House and Senate tax plans miss the mark for three big reasons. While expectations going into the event were high, disappointment is building as the tax plans are studied in broader detail. Beyond the obvious issue of significant differences between the House and Senate drafts, the suggested changes don’t match Trump’s earlier promises. On the campaign trail, Trump repeatedly criticized the country’s complex and high tax rates. While he avoided providing specific details, he promised big tax cuts for corporations and the middle class. In a recent White House event, he stated “We’ll make the tax cuts simple and fair so that the vast majority of Americans can file their taxes on a single sheet of paper”. Far from “simple and fair”, both tax bills are so complex that most ordinary Americans won’t be able to understand how the proposed changes improve their lives.
Problem #1: Winners and losers
The biggest issue with both bills is that a significant portion of the population stands to lose if either proposal goes through. As Republicans have chosen to substantially rework the existing tax code, creating a significant number of losers is inevitable. The House plan which repeals large medical expenses is automatically unattractive for anyone facing the prospect of significant medical bills in the near future. Similarly, repealing the state and local tax deduction (even while allowing up to $10,000 of deductions on property taxes), will raise taxes for a number of middle-class and higher earners in states such as New York, New Jersey and California. Collapsing the number of tax brackets from seven to four also creates losers as lower income earners get pushed into higher tax brackets.
Instead of reworking the existing system, an across-the-board tax cut (especially targeted towards the lower and middle-classes) would have been far more politically feasible. Today, Trump’s clean message of substantial tax cuts is diluted after looking at the details of the existing proposals.
