If This is MAGA Tax Policy, I Don’t Want It.

The 2017 tax bill passed by the Republican Congress and signed by Donald Trump was pretty good.  It really was a reform bill.  For businesses, it lowered the tax rate from 35% to 21% and got rid of a lot of special interest deductions.  That is the definition of a good tax bill: Broadening the base and lowering the rate.

The provisions for individuals weren’t as good, but there were good changes.  The standard deduction was doubled, and deductions for state and local taxes were limited to $10,000.  The result was a boon for lots of taxpayers: The increase in the standard deduction meant they didn’t have to worry about itemizing their deductions, making filing their tax return simpler and easier.

The one thing to remember about the 2017 bill is that it was the result of years and years of work by people like Representative and House Speaker Paul Ryan, Senator Pat Toomey, and many others.  President Trump signed it, but it was a real Republican bill, not his bill.

The tax bill working its way throughy Congress now is not that kind of a tax bill.  It doesn’t broaden the base and lower the rates.  It doesn’t make things simpler and easier.  Instead, it adds all kinds of new special provisions and phase-outs that make taxes more complicated and harder to file:

• For the first time since 1986, interest on car loans will be deductible, but now only if the car qualifies as “American-built,” whatever that will be defined as.
• The limit on SALT deductions is increased, but starts to be taken away above a certain level.
• Tips aren’t taxed, as long as you are in the right kind of job, file all the paperwork, and don’t make more than a specific amount.
• Seniors get an additional $4000 deduction, but it starts going away above a different amount.
• And so on and so on.  (See here and here.) 

In sum, it’s another tax bill Christmas-Tree tax bill, with a shiny new ornament for everybody with enough clout or a vote that is needed.  As The Wall Street Journal said, the “swamp is open for business in a big way.”  Instead of good tax policy that will help the economy grow and people prosper, we’re back to the good old days of buying votes with tax breaks and complicating the tax code in the process.  If this is MAGA Republican tax policy, I don’t see a whole lot of difference between this and what the Democrats would have done, other than which special groups win and which special groups lose.