Passed at the end of 2017, the Trump administration’s “Tax Cuts and Jobs Act” fundamentally changed the tax code for corporations and everyday Americans alike. It was the first major overhaul of the tax code in more than 30 years.
The bill passed the House and Senate mostly along party lines. Twelve House Republicans from California, New York, and New Jersey voted against the changes, most likely because they represent districts whose residents would be negatively impacted by changes to deduction regulations.
Like many issues these days, whether or not the overhaul was a good idea depends on who you ask. Here’s the rundown on the tax code changes and how they’ve been perceived by Republicans and Democrats.
Tax Code Changes
As you might have noticed when you filed your tax returns this year, things look a little different when it comes to deductions. The Tax Cuts and Jobs Act doubled the standard deduction, which effectively eliminated individual deductions for things like mortgage interest and charitable donations for most taxpayers.
The act also cut the corporate tax rate from 35% to 21%, which is the lowest since 1939, according to the Tax Policy Center. Once you add in loopholes, the tax rates for most companies ends up being closer to 18%.
The Joint Committee on Taxation estimates that the law will result in a $1.46 trillion increase to the national debt, while the Committee for a Responsible Federal Budget said the increase could be as high as $2 trillion.
Are these changes good or bad for the country? Again, it depends on who you ask.
On The Right
Though the tax cuts were passed by the Trump administration, they had long been a dream for many Republicans in the House and Senate who advocate for smaller government. One way to reduce the government’s role in our lives, they argue, is to reduce the amount of money the government receives — and that’s effectively what the Tax Cuts and Jobs Act does.
The tax plan is also a continuation of the trickle-down economic theory that rose to prominence during the Reagan administration and has remained a mainstay of Republican ideology ever since.
Former House Speaker Paul Ryan was a major proponent of the bill and, in rolling it out to Congress and to the public, focused on the expansion it would bring to the child tax credit and the savings that could be realized through the standard deduction increase.
“This plan is for the middle class families in this country who deserve a break,” Ryan said at a press conference in November 2017. “With this plan, we are getting rid of loopholes for special interests and leveling the playing field.”
On the Left
Democrats typically advocate for the government to play a larger role in society. They argue that the tax plan takes money from lower and middle-class individuals and puts it in the hands of large, powerful corporations who do not need it.
“It raises taxes on the middle class, millions of middle-class families across the country, borrows trillions from the future, from our children and grandchildren’s futures to give tax cuts to the wealthiest and encourages corporations to ship jobs overseas,” House Speaker Nancy Pelosi (then minority leader) said during the debate over the bill.
Democrats were also critical of the way that the bill was passed, with handwritten changes being made at the last minute and a lack of time for some members of Congress to read the bill before casting a vote.
The tax bill served as a campaign message point in the 2018 midterms and was credited as one reason the Democrats won control of the House, especially in swing districts.
The changes to the tax code made by the Tax Cuts and Jobs Act are set to expire in 2026, though they could change earlier if Democrats regain political power and pass new laws of their own.
The tax plan appears to be another symptom of the growing partisan divide in the U.S. The Pew Research Center in April found that 64% of Republicans thought the current tax system was fair, while just 32% of Democrats felt that way.
Photo Credit: Photo by Kelly Sikkema on Unsplash
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