It appears increasingly likely the Republican Congress will pass tax reform this week.
As we analyze the plan, it’s important to remember – incentives matter.
Details of the House/Senate compromise bill came out Friday. It features a top rate of 37% and a bottom rate of 10%. The corporate rate would drop to 21%. The standard deductions would nearly double. Individuals with existing mortgages would still be able to deduct their interest, and the compromise restored the deductibility of state income taxes up to $10,000. The plan would also eliminate the Obamacare penalty for not buying insurance. There are certainly things to like.
But as Peter Schiff pointed out in his podcast, there are also significant problems with the plan. It is riddled with loopholes and incentives that will substantially raise the debt – even more than projected.
I believe it this plan passes, we’re going to have a tax code that is more gameable, where more people are doing more things to rig the system, or exploit the loopholes, not that there’s anything wrong with that … But that is why the projections that the Republicans are out there with that this is going to add just $1.5 trillion to the deficit over the next 10 years are a bunch of nonsense.”
Peter estimates the plan will add nearly twice the $1.5 trillion the deficit. That’s above and beyond what it will grow naturally through the continuing expansion of government.
Republicans claim economic growth will help “pay” for at least some of the tax cuts and the deficit will actually expand less than projected. Economic growth means more money to tax. Even at lower rates, this will increase the government’s revenue. Peter called that “nonsense.”
You cannot grow the economy simply by…