The man who spearheaded the tax reform effort in the House of Representatives says the new provisions will accelerate America’s economic growth and surpass previous expectations thanks to middle class tax relief and a far more favorable environment for corporations and small businesses.
On Wednesday, both the House and Senate approved the $1.5 trillion package without any support from Democrats on either side of Capitol Hill. The win for the GOP ends the year on a political high months after the deep frustration of failing to pass an Obamacare repeal or reform bill.
House Ways and Means Committee Chairman Kevin Brady, R-Texas, led the tax reform push in the House of Representatives. He says the key to success on this package was Republicans all starting on the same legislative page. And Brady says the credit for that belongs at the other end of Pennsylvania Avenue.
“We started off from a good place. There was a lot of common ground. That’s because President Trump agreed this summer to work with the House and Senate tax writers towards one tax reform approach. That really made the difference in my view,” said Brady.
There were some important differences between the original House and Senate bills that needed to be ironed out in a conference committee. The Senate got its way in keeping seven tax brackets, although they were adjusted to make sure the vast majority of Americans got a tax cut, and repealing Obamacare’s individual mandate.
The House also won some tussles in conference, including what Brady believes might be the most important provision in the bill.
“The most important economic issue was to make sure that these tax cuts occurred for local businesses as well as our companies that compete around the world now, on January 1st of next year. We need that growth and expansion now,” said Brady.
In the end, Brady says the final bill was better than either the House or Senate bills, something he says almost never happens in Congress.
The passage of the tax reform package comes at a time when the stock market is booming and economists see GDP growth of three percent or more for quite a while. Brady says the new laws will accelerate our growth even more.
“[Economists] think that will stay this way for another decade or more, so the question for the country is do we just settle for this very slow growth where paychecks never move and kids come out of school without good paying jobs or do we shake it up?” asked Brady.
“This tax reform plan was about shaking it up, giving people back more of what they earn, creating an economy where their paychecks grow and getting our jobs back from overseas. This tax reform plan achieves that in a big way,” said Brady.
Brady says virtually everyone will benefit from the new law, starting with middle class families.
“If you look at the typical family of four in America, they make $73,000, so two blue-collar workers. They save $2,059. I know Washington doesn’t think that’s much. But for American families, that really matters,” said Brady.
A dozen House Republicans voted against the bill over the issue of state and local tax deductions. Previously, Americans could deduct those against their federal taxes. The new bill restricts the deductions to the first $10,000 in state and local taxes, meaning wealthy people in high tax states like California, New York, Connecticut, and New Jersey may well see higher tax bills.
But Brady says everybody else will have more money in their pockets.
“I don’t believe it will. Even the Tax Policy Center, which is very, very liberal and doesn’t even count growth and pretends the economy never changes – even they say 90 percent of Americans will see a tax cut, a real tax cut. Five percent will be close to break even. So this is real tax relief,” said Brady.
The biggest cuts, however, are for businesses, with corporate rates dropping 40 percent from 35 percent to 21 percent. Democrats assert that the money won’t go to new jobs or company expansion but will instead line the pockets of executives and shareholders.
Brady disagrees, contending businesses have been begging for tax relief for years in an effort to get more competitive.
“That 21 percent rate was all about making our businesses able to compete and win anywhere in the world, including here at home in America, then to be able to bring their earnings back to be reinvested in America. They can’t do that today.
“So that rate wasn’t a giveaway. It was a ‘get-them-back’ tax rate to bring our jobs back to America and make sure our workers and their businesses can compete,” said Brady.
Critics aren’t so sure. In a column for the Weekly Standard, Matt Labash excoriated Republicans for throwing crumbs to the middle class while giving a big wet kiss to big business. Labash points out that of the $1.5 trillion in tax relief, one trillion goes to businesses and $200 billion comes in estate tax relief, leaving just $300 billion over ten years in personal income tax relief.
Brady believes that’s a bad interpretation of the impact this bill will have on middle class families.
“Middle class tax relief is the top priority. You’ll see in there, up and down those income brackets, people are going to be able to keep more of what they earn and, more importantly, get those paychecks up by encouraging businesses to invest in workers in their companies. That is good for middle class America,” said Brady.
Leading liberals in Congress have used very strong language to condemn the legislation. House Minority Leader Nancy Pelosi, D-Calif., called it the worst piece of legislation ever to come to the House floor. Sen. Bernie Sanders, I-Vermont, predicted it would lead to the deaths of 10,000 Americans each year.
“I think they’re so obsessed with these things that they’ve ignored what this really does, which is to get America growing again and get people back on their feet in the economy,” said Brady.
“When they talk about the worst piece of legislation, I think most people look at Obamacare that’s the worst piece of legislation that’s been approved. Getting the individual mandate removed so people have choice about whether they want that health care is very critical,” said Brady.