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Sunday Political Brunch: A Taxing Problem—September 3, 2017

Sunday, September 03, 2017

 

Mark Curtis

It’s the quiet before the storm. While everyone enjoys Labor Day weekend and the last vestiges of summer, Congress is getting ready to return to Washington, D.C., later this week. President Trump and many Congressional leaders want to tackle the issue of tax reform right out of the box, but other priorities are demanding attention, too. Let’s “brunch” on that this week.

“What Is Tax Reform?” – Tax reform should not be confused with the much sexier issue of tax cuts. If I am getting a 10 percent tax cut, that’s real money. I can figure out what is going back into my wallet, so it’s an easier sell for Congress and the voting public. But tax reform is more complex, allowing for reconfiguring of tax brackets and items which may or may not remain deductible, such as home mortgage interest. It can be dry stuff, sexy only to lawyers and accountants. Plus, its tangible results are often felt in a matter of years, rather than right away. My point is that Congress could pass tax reform before the end of this year, but it may not be reflected in peoples’ pocketbooks until April 15, 2019. That’s five months after the 2018 election!

“Will I Make More Money?” – For many voters – pardon the pun – this is “the bottom line”! If I make $60,000 per year and my federal taxes are 15 percent, I am paying in $9,000. A tax rate cut to 10 percent will put an extra $3,000 in my pocket every year. That’s easy. But then they talk of reducing or eliminating the home mortgage deduction, or tuition tax credits, and other allowances only an accountant may know about. It gets cloudy and hard to figure what my real savings might be. Tax reform involves a lot of math (clearly the least favorite subject in school for most people.) And if a lot of the tax advantages go to high income earners, many people may be turned off, or at best be indifferent. It’s hard to make tax reform a bumper sticker campaign because of the complexities.

“Past Tax Reforms” – Tax reforms were most notable in the Reagan administration. Just seven months into his first term, he got the first of his tax reforms passed. Income taxes were cut an average of 25 percent over three years, but the federal deficit exploded. Some mid-course corrections were made in 1982, and the economy finally erupted with some of the biggest growth ever recorded. Reagan was easily reelected in a 1984 landslide. The Reagan administration passed another major tax reform bill in 1986, one that simplified the tax code by reducing 15 tax brackets to just four. The Reagan era of economic boom is still highly regarded by many.

“Should This Have Been Done First?” – I am a big believer in having a laundry list of accomplishments as a politician, including hitting a home run on your first at-bat. In 2001, President George W. Bush got a bipartisan education reform bill known as “No Child Left Behind” passed into law by the end of May. It gave him an initial victory. Had I led the Trump White House I would have gotten the infrastructure reform bill through Congress first because both Democrats and Republicans were on board. The Obamacare repeal could have waited, especially when there were early signs it was in big trouble in both the House and Senate.

“Infrastructure” – Just about everyone agrees that the nation’s roads, highways, and bridges are in sad shape. So, what do you do? Look, this is classic pork barrel politics. Investment in infrastructure is something tangible that Washington, D.C., does which is felt in just about every state and Congressional district. First, it puts people back to work, fixing things that just about every driver will tell you need to be fixed. It pumps money into local economies, and produces visible, tangible local results. It helps generate more state income taxes and sales taxes, so it fills state coffers, too. The downside is that the jobs are never permanent; and when the highways are done, many of those workers may be unemployed again. But it can provide a healthy, visible short-term spike in the economy.

“Should Obamacare Have Waited?” -- This is a tough question. In hindsight, many people say “yes.” I think the proponents of repealing and replacing Obamacare misread the tea leaves, when they thought repeal would be easy. Here’s the dynamic: The GOP-led House and Senate had voted many times to repeal Obamacare, knowing full well that President Obama would veto it. It was an easy vote. But fast-forward to 2017, and states such as West Virginia were faced with the prospect of pushing 200,000 people off the health care rolls in one of the poorest states in the nation. Suddenly, a repeal vote was not as easy to make. That was the case for many lawmakers in states that are struggling. Good research would have pointed this out last spring; but, instead, wishful thinking became an illogical political guide.

“What Have You Done for Me Lately?” – President Trump has been feuding with his top economic advisor, Gary Cohn, since Cohn was publicly critical of the President’s response to the violence in Charlottesville. Cohn told The Financial Times, “The administration can and must do better in consistently and unequivocally condemning" hate groups. Many observers believe Cohn is the linchpin of passing tax reform, and Trump would be hard pressed without him.

“Defending the President; Defending My Seat?” – A big quandary for many Republicans in Congress will be: “Do I defend my own record, or do I have to defend the President’s record, too?” As I have pointed out here often, almost all House Republicans won their seats on their own, without the President’s help. On the other hand, the Republican Senate majority owes its continuation of power directly to Trump’s coattails, as he helped carry key seats in North Carolina, Pennsylvania, and Wisconsin. But those three Republicans are safe, as they aren’t up for reelection until 2022. I predict most Congressional Republicans will simply run on their own records and keep their distance from the White House.

What would you change about our tax system or tax code? Just click the comment button at www.MarkCurtisMedia.com.

Mark Curtis Ed.D., is Chief Political Reporter for the five Nexstar Media TV stations serving West Virginia, including viewership in Ohio, Kentucky, Virginia, Maryland, Pennsylvania, and Washington, D.C.

 

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