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"Tax Cuts" From the Senate

Washington, D.C. hypocrisy was on full display AGAIN last week, releasing the so-called Tax Cut and Jobs Act, Senate style. There are differences between the Senate Bill and the House Bill, to be sure, but distinctions? Not so much! They are two versions of what I call The Big Lie. Components of The Big Lie include: 

Lie #1 - Tax Simplification. The Senate proposal has 7 tax brackets, rather than 4 (or 5) from the House Bill. Oops! There goes simplification. THIS IS THE MOST IRRELEVANT “SIMPLIFICATION” IN EITHER PROPOSAL. The amount you owe comes from a chart, a calculator, or a computer program. It is a nothing calculation, totally meaningless, and takes ZERO time to compute. Your time (or that of your Tax Preparer) is consumed calculating your Taxable Income. There are only 2 numbers that could make the number of tax rates relevant; Zero, meaning the FairTax, and One, meaning the Flat Tax. Any other number is another version of today’s broken system!

Lie #2 - 90% of tax filers will be able to file on a postcard-sized paper. There is not a snowball’s chance in Jacksonville, Florida this will even approach 50% of taxpayers. The reason lies in the preceding paragraph. Complexity is not in the preparation of tax returns, but in the complex calculations of the taxable portion of your income. This requires several pages and many forms for the majority of Americans.

Lie #3 – “Cost” to the Treasury. We also learned that Congressional Rules (both houses of Congress; both political sides) demand that Tax Simplification be limited in magnitude, as measured by the CBO (Congressional Budget Office) “static scoring” process, which ignores human behavior. We have decades of observation and years of anecdotal data. Tax cuts result in growing revenue, due to predictable human behavior. Telling the truth about tax revenues suggests the Congressional Rules be changed.

Lie #4 - Everyone will get a tax cut – not hardly. According to the Heritage Foundation analysis, about 90% of American businesses will have either a negligible result, or higher taxes. Small businesses outnumber large businesses by as much as 99%. For individuals, loss of the Personal Exemption (both proposals eliminate the Exemption) means that most families with children will incur a tax increase.

There are other terrible provisions in both proposals. The Senate Bill has some items that are preferable to the House Bill, and vice versa. The House eliminates all medical expense deductions, adding insult to injury (pun intended). The Senate Bill eliminates all State and Local Tax (SALT) deductions, punishing taxpayers who live in high-tax states. There are a host of others, which simply demonstrates that there is no way to make everyone happy, or even to treat everyone equally. I suspect that the chances of a reconciliation agreement and passage are quite slim. Right now, I hope it goes up in flames.

Van Wie Financial is fee-only. For a reason.