GOP tax "reform" likely to mess up economy, even if you pay less

With both houses of Congress trying to jam through competing tax proposals this week, it seems to be a good time to take a step back and see what these proposed changes might mean, and what other effects might crop up as a result. And to help with this question, I found a nifty tool in a CBS Marketwatch article- the Trump tax calculator.

I plugged in the situation for my family, and it looks like we would pay $350 less in taxes under the Senate bill than the House one, because of the way the mix in tax brackets works (we end up in the 22% marginal tax bracket for the Senate bill, but 25% under the House one). But more notably, this calculator says that under either plan it is better for us not to itemize, and take the newly doubled standard deduction instead. Going with the standard deduction would save us over $3,100 under the Senate bill, and around $930 under the House bill.

In other words, all of the state income taxes, property taxes and mortgage interest that we would pay next year would GIVE US NOTHING when it comes to a tax write-off. Neither would our charitable donations. If switching to the standard deduction becomes incentivized for many other Americans under this tax “reform”, significant ripple effects that would follow.

1. It makes owning a house a less worthwhile investment, because there are no tax advantages from it. This would obviously lower demand for buying a home vs renting, and would likely depress housing prices. Interestingly, Madison Mayor Paul Soglin went off on the GOP’s tax reform package two months ago, and said it would depress home prices. Soglin's complaint at the time was that State and Local Taxes (SALT) and mortgage interest deductions would go away, but even if SALT and mortgage interest were to stay in these bills (they mostly do in the House bill, while the Senate gets rid of SALT), my wife and I would STILL not take advantage of them because of the larger standard deduction, and I'm sure many others would be in the same spot.

2. Charities would hate it if individuals could not write off their donations, and you’d likely see a loss of services and employment in the non-profit sector as a result, since there would be less funds going in.

Then again, the ALEC/Koch model wants to have everybody beholden to a handful of connected, for-profit companies to get the services they need, so maybe that’s the intelligence of the GOP’s design.


These guys don't have to worry if they benefit from the GOP's plans

3. It also makes incentivizes states to shift more of their tax burden onto sales taxes (which have no write-offs in Wisconsin today), and away from income or property taxes. The Wisconsin GOP has already hinted that they would go in this direction if Congress were to get rid of SALT or make it less likely to be used by Wisconsin taxpayers. So if this garbage bill passes Congress and this state is stupid enough to return the GOP to power, get ready for 7-8% sales taxes.

We already know that the lower and middle classes pay more in Wisconsin taxes under the present system, but raising sales taxes and lowering property/income taxes would put even more of a burden onto those who are already paying a higher percentage of their income in state and local taxes.



In addition, as it stands right now the GOP tax plan gets rid of “above the line” deductions for items such as student loan interest, tuition for higher education, expenses that teachers pay for supplies, and contributions to an Health Savings Account or self-employed health-insurance plan (lines 23-35 on form 1040, if you want to give it a look).

Why does that matter for state taxes? Because it raises the person’s adjusted gross income, which means there IS MORE INCOME FOR THE STATE TO TAX. In other words, it would be an automatic TAX HIKE at the state level, a fact that Scott Walker failed to mention in the column he "wrote" this week approving of the GOP’s tax-cutting plan.

Now I’ll have to go look at our taxes from last year to see how it measures up, and whether we would pay more or less next year under these tax plans. But I do have little doubt we would pay more when the individual tax rates go back up in 8 years, as they would under the Senate bill (a budget trick designed to allow it to be passed with 50 votes in the Senate).

And I’m only talking about the tax side of the equation in this post. Obviously, the GOP’s plans to deform Obamacare and use spiraling deficits as an excuse to cut Medicare and Social Security are extra levels of toxic waste on top of these Piece of Shit tax “reform” bills.

Let’s not have that happen. Let’s put that Piece of Shit away, and deal with the real problems in our economy- stagnant wages and crippling inequality. Both items will be made even worse by the trickle-down absurdity that permeates this tax “deform” effort, and the inevitable bursting of both the stock and housing bubbles that would come soon after this bill would be signed would set this country’s economy even further back.

For many, we’ve already slid far enough over the last 40 years of this supply-side nonsense. Any more could be deadly.