Sometime today, both the House and the Senate will hold final votes on the tax legislation that has been working its way through Congress this year. And then, tomorrow, President Trump will sign it into law.
Democrats have treated the bill's passage as an apocalyptic event. Earlier this month, when a previous iteration of the bill passed in the Senate, Nancy Pelosi, the Democratic House Minority Leader, declared that it was literally the apocalypse. "It is the end of the world," she said, singling out the bill's repeal of the individual mandate. "This is Armageddon." How perilous the world must seem to her that this muddled bit of tax cutting could bring it all down.
Pelosi's apoplectic reaction offers, among other things, a reminder of how long it has been since Republicans last passed major legislation, and how unhinged the responses to such an event can be. The Tax Cuts and Jobs Act (TCJA) is not the end of the world, nor anything close. It is not even, unfortunately, the end of the tax code as we know it.
Instead, it is a predictable, conventional piece of Republican tax legislation, one that cuts taxes for corporations and individuals while sharply increasing the deficit. It is the sort of thing you can imagine passing, more or less, under Mitt Romney or John McCain or Jeb Bush. Which means, of course, that it has all the problems, and benefits, of conventional Republican thinking about taxes.
Among those benefits is the bill's centerpiece: a permanent reduction in the corporate tax rate, from 35 percent, the highest in the developed world, down to 21 percent. There is little serious disagreement amongst mainstream economists that America's corporate tax rate is too high. In 2012, President Obama proposed slashing it to 28 percent. Predictably, the Republican plan goes further, but it still leaves America with a rate that is higher than the European average of 18.8 percent. Cutting corporate taxes may not provide the sort of quick boost to job creation or economic growth that some of its more enthusiastic backers claim. But it positions the nation to be more competitive internationally in the long term by permanently reducing the cost of doing business in the United States.
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