The Trump Tax Plan is gaining steam and momentum even as natural disasters and the horrific events of this weekend in Las Vegas have changed the national dialogue. Here are three things you need to be watching on taxes:
Growth Projections and Deficit – In addition to the disastrous outcome of the Kansas/Brownback tax cut disaster, the Committee for a Responsible Federal Budget argues that there is no way that tax cuts will pay for themselves and that lowering taxes will lead to more deficit spending. “Past tax cuts in 1981 and the early 2000s have led to widening budget deficits and lower revenue, not the reverse as some claim.” Increased deficits represent a significant challenge to the U.S. economy and any tax plans advanced by the Republicans need to help reduce the deficit.
SALT – One of the most contentious proposals in the Trump Tax Plan is eliminating or limiting individuals’ deduction of state and local property taxes – also known as SALT. The problem with this proposal is that most blue states have higher local and state taxes. Blue state residents, who are already supporting the federal budget to a greater degree than red state residents, would see their taxes stay the same at best and under some proposals their taxes would go up. According to Yahoo Finance columnist Rick Newman, eliminating the SALT deductions is one of the “safest ways Republicans who control Congress and the White House can effectively raise taxes on some voters, while suffering minimal electoral harm.”
Donors and Urgency – An article in Politico this morning recounts a significant number of Republican donors who are fed up with the stalled Trump legislative agenda and are unwilling to support Republican candidates in the 2018 mid-terms until the Trump administration and Republican Congress get a legislative win. This puts pressure on Republicans to do something – anything really – that they can point to as a legislative success even if it’s poorly thought out or even harmful to the economy. The piece cites Thomas Wachtell, a loyal Republican donor and retired oil and gas investor, who recently expressed his frustrations directly to Mitch McConnell (R-KY) at a donor event. “You’re never going to get a more sympathetic Republican than I am,” Wachtell claims. “But I’m sick and tired of nothing happening.” As we saw with the Obamacare replacement plans advanced by Trump and the GOP leadership, few Republicans fully understood or cared about the details in the legislation; they just wanted to repeal Obamacare. Republican urgency – and the fear of losing the support of donors – could easily lead to poor policy and legislation that will need to be cleaned up later.
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