House Republicans achieved a major legislative victory this past week with the passing of the transformational, yet also controversial, $1.5 trillion tax reform bill. Passed 227-205, with every Democrat and 13 Republicans voting against it, it is undoubtedly a major step forward in simplifying America’s long-tangled tax code as well as encouraging increased private-sector activity.
Tax reform has long been a pipe dream in the halls of modern Washington, let alone in the minds of countless Americans across the country as they plan and prepare their taxes each year. While there have been several tax cuts and reforms in recent years under both the Bush and Obama administrations, true fundamental tax reform has not been seen since the 1980’s with Reagan’s tax cut bills.
According to a Fox News poll earlier this year, over 73% of Americans wanted significant tax reform this year. As always, where such coalitions fall apart are in the details.
While it cannot be said for sure that the House tax bill as passed is truly as monumental a reform as Reagan’s tax code revamping, it certainly goes beyond just shifting the scales as recent tax bills have and rather goes to restructuring some of the fundamental assumptions of our tax system.
The House tax bill is primarily based on the Reaganite premise of spurring economic and business growth, rather than redistribution, to create increased innovation, wealth, and jobs, which then lead to a rise in overall economic conditions and opportunities for middle and lower class Americans.
Indeed the bill’s free market theoretical basis is in part why its scoring by various agencies and organizations has been so inconsistent, and thus partly why it ended up sadly being almost a strict partisan vote.
The bill would almost immediately result in tax reduction and simplification for ordinary Americans, with the standard deduction being doubled, bracket simplification from seven to four, and dramatic modification of many deductions and credits.
However the real potential boon from the tax bill is in how it will affect business activity, whether by large corporations or small businesses. By reducing the corporate income tax rate from 35%, currently among the highest in the developed world, to 20%, among other more technical provisions, the bill is likely to dramatically spur investment and spending by companies in America rather than parking their money overseas.
Now the million-dollar question is if the Republican Congress and Trump Administration will be able to grease the political wheels and actually get their first major legislative reform bill passed. As we’ve seen with the Obamacare repeal and replace fiasco over the past few months, DC right now remains in many ways as gridlocked as it has been since 2010.
Unlike the time between 2010, when Republicans retook Congress in the Tea Party wave, and when the Trump administration took office, the gridlock appears to not be from two parties in power in a divided government who simply could not agree on anything in this hyperpolarized time. Rather, it seems Republican internal strife has been the main detriment to getting a conservative agenda passed.
Given that the 2018 election cycle is already well underway, and with Democrats seemingly energized and motivated by anti-Trump sentiment as we saw in Virginia’s election results earlier this month, undoubtedly Congressional Republicans want to be able to point to a significant legislative achievement to turnout Republicans voters who want to see a reason to go to the polls. The tax reform bill may be that big opportunity.
Just as impactful, the tax reform bill might be President Trump’s first major legislative victory. The President has been able to make significant and often very-impactful policy change through executive action, but nonetheless a legislative win offers both a policy victory as well as significantly bolstering his political image at a time when it is shaky, among both Republicans and otherwise.
With the Senate developing its own version, particularly regarding the child tax credit, of the tax bill to be soon voted on as well, it looks like even among Republicans there will still be a lot of maneuvering and deliberating before we see if the bill actually makes it through.
In the meantime, the fireworks in DC continue as we all get used to this “New Washington.”