Republicans have long advocated for a more equitable and efficient tax structure that eliminates loopholes and carveouts in the hopes of lowering total tax rates.
“The tax code is littered with hundreds of preferences and subsidies that pick winners and losers and create complexity,” wrote House Republicans headed by then-Speaker Paul Ryan and then-Rep. Kevin Brady in their 2016 tax legislation. “Our tax code funnels money into politically connected interests, rather than encouraging growth and new jobs through free-market competition,” the author writes.
In the modern era, one thing has remained constant: the One Big Beautiful Bill proposed by President Trump is not an attempt to simplify taxes.
On the contrary, it started with an effort to prolong the party’s tax cuts from 2017—which, although simplified, added complexity—and then added more, in keeping with other campaign pledges for the presidency. Lower taxes and an increased pile of tax incentives are the hallmarks of this expansive and eccentric piece of legislation that is uniquely Trumpy, thanks to a hefty dose of congressional politics.
“It’s certainly a departure from what Republicans were trying to do in 2017 and broadly a departure from what Republicans have been arguing for decades about tax reform,” said Kyle Pomerleau, a senior scholar at the conservative-leaning American Enterprise Institute, to me.
However, whether or not filing your taxes is a hassle is only part of the question. It all comes down to whether or not that intricacy is actually useful. To bolster investment and Trump’s reindustrialization agendas, the GOP measure includes a provision that permits firms to completely deduct expenditures on machinery and equipment from their taxes.
Regarding other crucial aspects of the measure, most economists I spoke with expressed concern that it represents the worst possible combination: a rise in the national debt to fund tax cuts that do neither stimulate growth or provide any other beneficial economic results.
A management professor at the University of Pennsylvania and faculty director of the Penn Wharton Budget Model named Kent Smetters made the following observation: “There’s not a lot of pro-growth stuff.” He refrained from calling it vote-buying since he believes it would be making a normative judgment that is not within his expertise.
Consider one of Trump’s widely-supported campaign promises: he would not impose taxes on overtime or gratuities. Those measures may only serve to incentivize people to continue living the way they are. In other cases, it may cause companies to reevaluate their compensation practices.
Regardless, the employees who stand to gain are the ones who should be celebrating. The question of why the government is favoring some groups of employees over others remains unanswered. (Since many people in the gambling and hotel industries depend on tips, it’s likely not coincidental that Trump campaigned on a pledge to provide this tax benefit to voters in his bid to win Nevada in the previous election.)
Furthermore, reducing taxes without compensating for the lost revenue leads to rising debt, which might impede growth. This could be achieved in a number of ways, including by expanding the tax base (as was done in 1986) or by discovering new methods. After all, instead of doing something else, investors are giving the money to the US government. Also, the new GOP tax legislation is anticipated to increase deficits by trillions over the next decade, and that’s before cutting expenditure.
A Berkeley professor named Alan Auerbach stated, “The money has to come from somewhere.”.
Since President George W. Bush’s tax cuts largely consisted of lowering rates while raising the debt, they were also not the best policy framework. Yet this invoice? A lot more strange stuff is in it, and the size is considerably greater, so it’s worse than the Bush tax cuts, according to Auerbach.
It is clear how much the Republican Party has evolved under the leadership of the president, and the tax package’s enormous size and eccentricities are reflections of him. The 2016 GOP platform, drafted by Ryan and Brady, referred to the 1986 tax reform law as an example of the party’s guiding principles, stating that they aimed to “replicate and build upon this achievement.” This law reduced the number of tax brackets, eliminated deductions, and lowered rates.
However, this is no longer Ronald Reagan’s party; it is now Donald Trump’s.
In an opinion piece published in the Wall Street Journal in 1999, Trump criticized the bipartisan 1986 law, calling it “an offense against the working man,” and he criticized the elimination of certain deductions, calling them “predictably disastrous.”
The Trump government must now defend the law in all its quirkiness.
Many criticisms of the new law fail to address the main points, according to Joe Lavorgna, a counselor to Treasury Secretary Scott Bessent. He said that keeping the tax cuts of 2017 from expiring was one of Trump’s top priorities since doing so would have prevented higher tax rates and weaker economic development.
His aim is to have a “vibrant, healthy” domestic automobile sector, and he thinks that wording that lets individuals deduct the interest they spend on auto loans for American-made cars, for example, would help get them there.
Additional production will result from the clause that eliminates taxes on overtime, according to Lavorgna. For him, “anything that incentivizes people to work an extra hour because they’re not going to be taxed on it or are going to be taxed at the same rate” was good for the economy. There’s no way to tell. Something is being made by them.
Furthermore, are tips exempt from taxation? According to him, that will be beneficial for individuals facing substantial cost of living pressure.
Without a doubt, tax cuts remain the Republican Party’s central platform, the unifying theme that has the potential to unite a coalition of divided lawmakers.
Restructuring the tax system, though? It appears that the conservative ideal has died a peaceful death.
