The left is screaming their dislike of the new tax code. Rather than admit that they are arguing against a tax break and a stronger economy, they’re spinning stories about how this favors the rich instead of the poor. CNN has been a leader in this story, but they accidentally published a tax calculator that shows the truth.
CNN has already revised it, but they released a tax calculator to let readers see how the new legislature would affect them. The original calculator showed that the tax breaks heavily favor the lower income earners and shift tax burden towards the wealthiest individuals. How that made it past CNN editors is still a mystery.
The revised version shows much better benefits for the rich than the original, truer version, but it still counters the general narrative. Even after edits, CNN is admitting that the tax breaks will benefit the lower two income brackets at double the rate of the highest brackets, and that assumes all deductions will be as favorable as possible for the wealthy.
The unbiased reality is that this is a tax break across the board for anyone who wasn’t dodging taxes, and it’s a huge tax increase for anyone who was.
What the Bill Actually Says
It’s been through many edits, but what appears to be the final version is a huge simplification of tax structure. The total number of income brackets is being changed to seven, and every bracket is seeing at least a small to moderate tax break.
Alongside that simplification are about a hundred pages of changes to deductions and loopholes. Since deductions are disappearing, the standard deduction and child deductions are being doubled. This means that anyone in the smallest two brackets is seeing about a 10-percent drop in the taxes they might owe. In many cases, this equates to an increase in their tax credits. On the richer end of things (anyone making over $225,000 a year), they will only enjoy about a five-percent tax break. In many cases, the changes to deductions will hurt wealthy Americans who were exploiting the system to effectively dodge their taxes.
Debunking the Left
The general claim from the left is that the new tax structure favors the rich and hurts the poor. You’ve already seen that this is patently false, but there are a few nuances that we’ll discuss to thoroughly address issues.
The primary complaint is that the rich will owe fewer total dollars in taxes than the poor. This is simple math. If you make $100,000 a year, then 5 percent of that equates to $5,000 in tax savings. If you make $20,000 a year, then a 10-percent savings comes to $2,000. By this logic, the tax code can be seen to favor the rich. But, if you’re going to do that, you have to be consistent. This complaint from the left ignores what happens when the tax break expires in eight years. If Congress doesn’t renew the break, then the wealthiest three brackets will be paying more in taxes than they do today, even while the bottom groups will break even. In the long run, the plan still heavily favors those who earn the least.
The new bill removes the Obamacare mandate. The left says that this will leave 15 million people without insurance. This is a completely misleading idea. As many as 15 million people might opt out of insurance, but the government isn’t stripping it. It’s simply a choice many Americans might make when that freedom is restored.
Corporate Tax Breaks
Here’s the biggest source of whining. The new corporate tax structure drops the standard rate from 35 percent down to 21 percent. This, the left claims, is an unacceptable tax break for the wealthy. Their notion ignores the fact that the U.S. has the highest tax rates of any developed country in the world. It also ignores the details that make this a tax break for small and medium businesses but an effective increase in taxes for the largest companies. It all comes back to loopholes. Large businesses will no longer be able to use massive deductions and redistribution schemes to dodge taxes. They’ll actually have to pay the 21 percent, which is a huge increase for companies like GE that have paid nothing in taxes for decades.
More importantly, the new bill changes the rules for foreign holdings. Right now, money made overseas is never taxed if it remains overseas. The new law will allow companies a one-time repatriation tax break of 15 percent, but it will be automatically applied to all foreign assets. The companies don’t get a choice. They have to pay the tax. Moving forward, they’ll be taxed on foreign holdings, but any foreign tax already paid will be deducted from what they owe to the U.S. This all sounds a little complicated, but the bottom line is that companies can no longer hide assets in offshore accounts and foreign companies. The on-paper rate is much lower, but the effective tax is actually a lot higher and will generate hundreds of billions of dollars in tax revenue every year.
In the end, the new tax code is a huge step forward for our country, and it’s a great victory for Trump. His ability to keep promises on economic growth are now attainable, and 2018 is already primed to see excellent gains in GDP, job production and wages.
~ American Liberty Report