Congress had a lot on their plate this winter as they debated a new tax reform proposal backed by the Republicans that was eventually passed in the House of Representatives.
Congress’s Joint Committee on Taxation asserts that the proposed tax cuts would create more than $1 trillion in debt over the next decade.
Tax cuts have been proven to positively stimulate the economy. However, this only applies when economic growth is slowing down. Currently, the economy is growing and in a long recovery period. During periods of growth like the one we are currently in, the government should be making attempts to decrease its debt, not make it larger.
“I think the timing of this tax cut from the perspective of the deficit is completely upside down,” said Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities.
Over time, the initial incentives that enticed supporters of the tax cuts will be eroded by inflation.
The most notable component of the proposal is a permanent reduction in the corporate tax rate from 35 percent to 21 percent. This will provide leaders of large, wealthy corporations a completely unnecessary financial break.
Other highly criticized aspects of the plan include capping the deduction for state and local taxes at $10,000 and eliminating the Affordable Care Act’s requirement that most people have health insurance.
The tax cuts will likely impact schools and teachers. The House bill plans to turn graduate student’s tuition waivers into taxable income, which would dramatically increase what they owe in taxes each year. It would also eliminate a tax deduction of up to $2,500 on student loan interest.
Many students have relied on these breaks in order to pursue higher education and these changes could result in a devastating decrease in graduate students.
The bill would also affect elementary, middle and high school levels of education. The House bill proposes a repeal of a $250 tax credit given to teachers who use their own money for various school supplies.
Representative Lloyd Doggett, Democrat of Texas, said, “We will be cleaning up this mess and the blunders in this bill all of next year.”
