Playing politics has led to a disastrous tax billBy Paul Bousquet | 01/23/2018 12:54am
American democracy is based around the idea that members of Congress are actively seeking to represent their constituents fairly. However, the recent emergence and fallout of the House and Senate tax bills has shown that both Republicans and Democrats fail to live up to their representative mandate. By prioritizing partisan strength over policy improvements, both political parties have set our country up to fail politically, morally, and economically.
Republicans have claimed that they have passed the biggest tax cut in US history. The bills biggest tangible policy change is lowering the corporate tax rate from 35 to 21 percent. In theory, I fully support lowering our corporate tax rate, but only if the Tax Code is substantially simplified. Contrary to their rhetoric, Republicans are not putting forth a bill that provides simplicity.
Politico reported on December 6th that much of the Senate version was hastily edited, including portions of the bill that are handwritten in semi-legible cursive. As a result, the number of loopholes in our tax code would increase because of the bill, certainly not the way to reform taxation.
The Congressional Budget Office calculated back in March that the effective US corporate tax rate is 18%, since loopholes create large deductibles. Big corporations with expensive lawyers can easily manipulate the tax code; Verizon’s effective rate is literally negative, with the government basically paying Verizon instead of taxing them.
Republicans have not eliminated any of these loopholes because they can’t step on the toes of any lobbyist who doesn’t want real tax reform. Essentially, by engaging in cheap politics and not actually implementing their own ideas the status quo goes from bad to worse.
Republicans have also had to use hyperbolic generalities to economically justify their plan. Both Republican Congressmen and the White House claim the plan will allow the US to average 3% growth over a decade. The likelihood of this growth target actually being achieved is quite low.
The US is a frontier economy, meaning it’s much harder to attain high levels of consistent economic growth. In addition, telling ourselves that there’s no way anything can go wrong in the next decade is foolish. In order for the tax plan to have any economic justification, political leaders have abandoned their commitment to fiscal responsibility.
In politics, there is constant pressure to be outwardly adamant that you are completely right and you are destined to win. But the desire to present the party powerfully has led politicians to predict an overly convenient future. Some may point to recent announcements of wage hikes by big corporations, but these are short-term anomalies. Walmart had to close over 60 Sam’s Clubs just to maintain margins. These announcements won’t happen every year, even though the bill alters the tax code over the next decade.
In theory, the differences in ideology between political parties should lead to compromise. Despite the necessity of this give and take, the current Congress has positioned itself as the most politically polarized in its history. As a result, both political parties now have a primary objective to see the other party fail.
Often, politicians will act against their own ideological interests for partisan domination. For instance, Republican Senators Marco Rubio and Mike Lee proposed an amendment to the tax bill to increase the child tax credit. Ideologically, Democrats should have embraced the amendment, but 39 Democrats opposed its passage. Presumably, Democrats wanted to sway like-minded Republican senators away from the vote or were concerned that a larger child tax credit could make the bill more popular. However, the bill still passed, and they by extension chose not to positively change the law because of selfishness. In short, both political parties have abandoned their values.
Republicans have sold myself and millions of other Americans down the river in order to be able to say they passed “the largest tax cut in history”. Clearly, something is wrong. Clearly, the system has failed us. We no longer have a government who governs by the people and for the people. We have a government who governs by themselves and for themselves.
Paul Bousquet is a sophomore majoring in economics. His column runs biweekly.