Almost Everything Is Wrong With the New Tax Law - Part II
Second, the act emphasizes cutting taxes on corporations, not on people. Few Americans buy into the “trickle down” argument that tax benefits showered on corporations will translate mostly into higher wages and vastly faster economic growth. Most of the economic evidence supports their skepticism.
Third, the tax cuts blow a large hole in the federal budget, and most Americans think the deficit is already too large. Have you noticed how Republican politicians stop caring about the deficit when their minds turn to tax cuts for the rich? Some of them are already clamoring for cutbacks in spending on income support, nutrition and health care because—you guessed it—the budget deficit is so large. They didn’t even wait for the ink to dry.
Fourth, many Americans are rightly suspicious of deals that get rammed through Congress on a strictly partisan basis, with no public hearings, but with language drafted by lobbyists under cover of darkness. But Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan understood the wisdom of the old adage that a rotting fish smells worse the longer it sits on the dock.
Let’s imagine that Mr. Trump and the Republicans really wanted to reform the tax code, rather than just deliver tax cuts to the rich. What might they have done instead?
First, Congress could have simplified the tax code rather than complexified it. To be fair, there is some genuine simplification in the Tax Cuts and Jobs Act. A few loopholes did get closed, and the near-doubling of the standard deduction will make paying taxes easier for millions of Americans. Terrific. But the new law also includes complex new provisions for taxing pass-through income from unincorporated businesses and corporate income that is earned (or, rather, booked) abroad. These defy description, will baffle people for years, and will spawn quite a few tax shelters.
More on Part III
https://www.wsj.com/articles/almost-everything-is-wrong-with-the-new-tax-law-1514416503
Mr. Blinder is a professor of economics and public affairs at Princeton University and a former vice chairman of the Federal Reserve.
