3-(Mis)Statements About Tax Reform

With the passage of the Tax Cut And Jobs Act on Wednesday, I wanted to address a few of the questions and misinformation currently circulating about the impact of tax cuts on the U.S. economy.

Over the last couple of months, I have been repeatedly asked why I am not “enthusiastic” about the “greatest tax reform” since the Reagan era.

First, let me be clear, I like getting a “tax cut.” Under the new plan, and because I own several small businesses structured as limited liability corporations (LLC’s), I will potentially see a reduction in the amount of taxes I will pay next year.

What I am opposed to, as a “fiscal conservative,” is the ongoing expansion of our debts and deficits which are an inherent drag on the future prosperity of the country.

For the last 8-years, Republicans have repeatedly blamed the previous Administration for doubling the national debt and further expanding dependency on the welfare and entitlement system. When the Republican-controlled Senate and House had the opportunity to live up to their promise of reducing spending and being more fiscally responsible, their first piece of major legislative action will add another $10 Trillion in debt over the next 10-years, increase the deficit to more than $1 Trillion, and double the size of an existing welfare program through increasing child tax credits.

As the Committee for a Responsible Federal Budget just wrote:

“This is the wrong legislation at the wrong time. Before the country enacted tax cuts in 2001, debt was at modest levels and we were forecasting nearly $6 trillion in budget surpluses over the following decade. Today, debt is at post-WWII record levels, and we’re on course to add $10 trillion to the debt over the next decade even before these tax cuts. Unquestionably, this legislation would make a bad fiscal situation worse. And it opens the door to further debt-financed legislation this year and in the future.

In combination with other year-end legislation, this tax bill could cause the return of trillion-dollar deficits as soon as next fiscal year; and it could lead debt to exceed the size of the economy within a decade.Meanwhile, it will leave us with little fiscal space to address future emergencies and priorities.

No one predicted that after the 2001 tax cuts we would have experienced the largest terrorist attack in our nation’s history, fought two wars, been hit by several major hurricanes, and ultimately fallen into a deep recession and financial crisis. Even if no similar events occur, our debt is rising unsustainably. Certainly, this tax cut makes us less equipped to deal with the next disaster, war, or recession.

I remain hopeful that this tax bill can help to improve economic growth. But likely the largest effects will be from a one-time economic sugar high; and when we come down from it, America will enter uncharted fiscal waters.”