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Guest Editorial: GOP tax plan good for the nation
America’s complicated and onerous tax code has long needed an overhaul. Though far from perfect, the GOP tax reform proposal is an important step in the right direction.
With Senate and House leader reconciling their respective versions of tax reform on Friday, the Tax Cuts and Jobs Act is set for a vote this week. Passage of the bill is critical for the GOP’s agenda moving forward.
While House Minority Leader Nancy Pelosi has comically condemned the GOP tax reform effort as akin to “Armageddon” and the “worst bill in the history of Congress,” a sober reading of the proposal reveals a mostly sensible set of reforms, albeit with potentially harmful impacts on some Californians.
The bill places a cap on deductions for state and local taxes at $10,000, which will disproportionately impact taxpayers in states like California, where about a third of taxpayers currently claim the deduction.
On the whole, however, most taxpayers will see relief.
One of the most significant highlights is the slashing of corporate tax rates from 35 percent to 21 percent.
Currently, the United States has one of the highest corporate tax rates in the world. When assessing the top tax rates at the federal and state level, the nation’s corporate tax rates reaches nearly 39 percent, compared to 27 percent in Canada, 24 percent in South Korea and 19 percent in the United Kingdom.
Such high rates put the United States at a competitive disadvantage. President Obama recognized the need to lower corporate tax rates, in 2012 proposing slashing the rate to 28 percent.
Further, unlike most of the world, the current tax system used by the United States taxes both the foreign and domestic income of businesses with American-based headquarters.
By lowering corporate tax rates, and moving to a territorial tax system as used in most advanced economies whereby businesses are taxed only on income earned within a country’s borders, businesses and American workers alike are likely to benefit from greater investment and job creation in the United States.
On the individual side, the GOP tax proposal lowers most individual tax rates. It doubles the standard deduction for single filers to $12,000 and for married coupled filing jointly to $24,000. It expands the child tax credit and preserves an assortment of tax deductions, including those for student loan interest and medical expenses.
People deserve to keep more of the money they earn, and this proposal is mostly consistent with that principle, at least through 2025, when the tax cuts would expire unless extended by Congress.
The proposal is far from perfect. The tax code will remain complicated enough that, as a group of tax experts recently explained, it will continue to “advantage the well-advised (and their advisors) playing tax games.”
Even granting optimistic economic impacts, the proposal could increase the federal deficit by about $1.5 trillion over the next decade. Republicans, ostensibly the party of limited government and fiscal responsibility, will need to curtail federal spending, including on sacred cows like the military and social programs, to responsibly balance the budget and avoid saddling future generations with debt.
Orange County Register, Dec. 19