By Sam Madden
The latest legislation coming out of Washington regarding the tax reform is the perfect example when sides immediately dig in out of the starting gate and will not even make an effort to reach across the aisle.
The bill was not as bad as the Democrats made it out to be at the beginning, and it wasn’t as good as the Republicans made it out to be either.
The basic starting point of a 20% corporate tax, keeping the top Marginal Rate at 39.6%, getting rid of SALT, (state sales and income tax deductions), capping mortgage interest deduction to a $500k home, (current law is at a $1 Million Home), and other deductions that were to go away ended up all in jeopardy.
What we now have is SALT deductions up to $10,000, capping mortgage interest at a $750k home, reduction of the top marginal rate from 39.6% to 37%, the getting rid of the proposed legislation that would have prevented local governments from using tax exempt municipal bonds to pay for the construction or renovation of professional sports stadiums, and other changes that are unfavorable, particularly since this country is $20 Trillion in debt.
The job of our elected officials in Washington is to work together. A Democrat should have been meeting and making phone calls with the GOP from the get go, guaranteeing that his/her vote in favor of this bill, could easily be gotten, by being involved. Not by immediately criticizing the bill as only a give away for the rich which it is not, (and the same thing goes for a Republican lawmaker when the ACA was being proposed).
I came across quite a few people from the left that were condemning this bill for the taking out of or limiting itemized deductions. They kept saying that it will hurt lower income and lower middle class people. The problem is that most of those people don’t itemize and even they did, under the new proposed legislation they are getting their standard deduction doubled. So for example: If a married couple itemized last year because they had $18,000 in deductions, (under the current standard deduction of $12,700), would no longer need to itemize under the new proposal because they are now getting a standard deduction of $24,000, (so this couple is actually getting an additional $6,000 in an automatic deduction).
What a lot of people don’t seem to understand is that a married couple would have to be making a lot of money and have a lot of deductible expenses in order to even reach the new threshold of $24,000. So the changes announced recently in the legislation have only helped the well-to-do.
Then let’s look at this real life example:
Single mom, with two kids making $40k does not have enough deductions to itemize. She currently would have an AGI of $18,500, ($40,000 less $9,350 standard deduction for head of household, less three personal exemptions at $4,150 each) . Tax bracket 15%. tax due of $2,775. Less a $1,000 child tax credit for each child, tax due of $775.
Here is the new proposed plan for this person. Standard deduction up to 18,500 from $9,350 new AGI $21,500. New tax bracket is 12% tax is $2,580. $2,000 tax credit for each child, comes to $4,000, she gets a refund of $1,420, instead of having to pay $775.
So as we see anyone saying that this bill is only a give away to the rich is highly mistaken.
In summary what we now have with the current tax reform package is something worse than what was initially proposed, and why? Because one side of the aisle let the other side of the aisle totally control the process, instead of saying, “I am here, I want to listen to all ideas with an open mind, and work together for something good for the American people.” (And this goes for any bill proposed by any party).
When we work together does that mean changing one’s values or goals? No. What it means is that the best bill is a bi-partisan one where everyone has a say. Not everyone may be happy with the outcome of the bill, but when both sides work together, and neither side takes 100% control over the process, we are closer to having something work for this country. Instead of having something that moves farther away from what should be the number one goal of every elected official, bi-partisan legislation, not immediately demonizing the other side.
I encourage our lawmakers to work together. Stop with the partisan talking points, keep reaching out to the other side and bring each other in on the process. But in order to do this we must have humble elected officials, and to make sure of that it is up to us, the American People, to vote in people with such characteristics and not the type that give loyalty to party over loyalty to us.
Sam Madden is a Co-Director for the Center For Pluralism. He has a background in Accounting and has done taxes for a living, He can be reached at email@example.com