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20/11/2017

Controversial GOP tax-cut bill before the US Congress – The Facts

  • Gerardo E. Martínez-Solanas
  • Visto: 97

Jonathan Chait of New York Magazine holds that the GOP’s effort to create economic growth with its latest tax plan is deeply flawed and will have a negative impact. He argues that the Republican plan moves against the party's principles regarding balanced budgets and lower budgetary expenditures and predict a substantial increase of the already too high National Debt that more than doubled during the Obama's Administration.

On the other hand, Grover Norquist of Fox News finds it to be a tax plan carefully thought-out to maximize the sucesses of American companies and to remove punitive taxes that hit too many people, thus stimulating the whole economy and facilitating jobs creation. Regarding corporate taxes, corporations will be able to compete in better terms around the World by lowering them, bringing higher revenues to Americans, reducing the trade deficits and providing much-needed jobs in companies returning to America.

The GOP proposal would slash corporate income tax –presently one of the highest in the World– as well as repealing the estate tax (inheritances) and the alternative minimum tax. 

Chait argues in New York Magazine that Republicans "have not found anywhere near enough added revenue to offset the costs of their cuts", but "will reduce revenue by $1.5 trillion in its first decade" and it "may reduce revenue by even more in the second decade", something that is pure speculation because he does not offer statistical projections to sustain these assertions. Initial budgetary deficits are predictable, but previous "Reaganomics" applied in the 80s and 90s proved that income would substantially increase in the long run. 

Norquist is more specific pointing out to the following facts: the GOP tax plan would double the standard deduction from $12,000 for a married couple to $24,000, it would also cut rates for all Americans at 0%, 12%, 25%, 35% and 39.6% brackets, so that the top rate would still be the same as what Americans have now, it would abolish the inheritance tax and the alternative minimum tax, and business taxes that are now at 35% for American companies (among the highest in the World) would fall to 20% immediately. In comparison, China's rates are 25% amd Canada's 15%.

Note in the chart above, that all married couples earning less than $75,000 per year will benefit.  In fact, those earning less that $18,550 will benefit from the $24,000 standard deduction (increased from $12,000) and eventually pay 0% taxes. Therefore, it is clearly a tax-cut bill. Norquist calls it "most importantly a job-creating, income-increasing bill". 

In fact, big corporations and many other medium and small ones move away in this global era to places with welcoming fiscal policies, but they will be very much tempted to come back to the US market (the biggest of the World) if conditions are favorable. This corporate immigration would be a godsend to American workers and professionals.