Tax Reform - Vivian Eng - Grade: A- PDF

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Tax Reform Paper The Tax Reform signed by President Trump in December of 2017 was said to be one of the largest tax cuts that only the wealthy and big corporations would see. Designated to benefit the corporations and rich, all Democrats opposed signing this bill. With a vote of 51-48, Republicans had won, now funneling even more money to the rich. There is a clear divide between the winners and losers of this bill; multinational corporations and the uber-rich won, while the normal working Americans had lost. The tax cut has now brought along greater inequality between the rich and the poor. (CNN, 2019). Republicans view this tax reform as a step towards higher economic mobility and growth. Since corporations are now facing a lower tax rate, this would promote higher wages for employees and the creation of more jobs. But we can see that lowering corporate tax rates actually did not create more jobs and employers on average got a 2 cent increase. (Vox, 2018). Another clear winner of this bill is the top 1 percent of Americans. Those individuals who make an income greater than $500,000 or couples with a combined income of $600,000 or more see a tax cut of 39% to 37.1%. (The Balance, 2019). Democrats strongly opposed this bill, seeing that this bill does not benefit the majority of America’s population. Families living in high costs, high tax states will be hit the hardest from this reform. Families in these states will see lower child tax credit and receive lower deductions from before (only credit up to $10,000). (BBC News, 2017). Roughly 13 million people have been left uninsured now since the reform removes the public mandate of healthcare. Since healthy people have no need to purchase healthcare, they will most likely opt out of purchasing a healthcare plan. This act will inevitably lead to an increase in the costs of premiums, which will take a toll for those staying in the system. (BBC News, 2017).

From the Haig Simon’s approach, we can see that this new tax reform strongly deviates against it. The Haig Simon’s standard is meant to improve upon vertical equity, stating that those who make more are taxed more and those who make less have received more deductions. Instead of taxing the wealthy at a higher level, they are receiving major deductions. The tax reform looks at the wages of wealthy individuals and decides that the wealthier you are, the more you are allowed to a tax cut. (CNN, 2019). If corporations now are able to funnel more money to themselves, instead of distributing the profits back to employees’ wages, the owners could be pocketing the money themselves labeling it as “business expense.” (BBC News, 2017). The only part where the new tax reform doesn’t quite deviate from the Haig Simmons approach is the horizontal equity standpoint since everyone regardless of income is still receiving some sort of tax cut. The point of the Optimal Tax Theory is to strategically set a tax rate that will maximize social welfare in the community. We can see that this tax reform aligns with the Optimal Tax Theory since President Trump signed this reform in the hope to improve America’s economy and have it working at its most optimal state. But from what we see currently, instead of improving America’s economy it overall declined and is making history since historically we would see a rise in the economy instead of a drop. (CNN, 2019). At the end of the day, I believe that the tax reform was only included to benefit the wealthy but uses the Optimal Tax Theory as its cover-up. Additionally, America is a highly corporatized society and with that being said, it’s easy to pass laws that involve benefitting corporations. Although the Haig Simmons approach was strongly deviated from, we can see that the reform still provides some tax relief for the rich and allows people the choice to opt in or out of healthcare.

Sources Kaplan, Thomas, and Alan Rappeport. “Republican Tax Bill Passes Senate in 51-48 Vote.” The New York Times, The New York Times, 20 Dec. 2017, www.nytimes.com/2017/12/19/us/politics/tax-bill-vote-congress.html. Analysis by Lydia DePillisCharts by Caroline Matthews. “4 Ways Trump's Tax Cuts Changed the American Economy.” CNN, Cable News Network, 15 Apr. 2019, www.cnn.com/2019/04/15/economy/trump-tax-cuts-impact-economy/index.html. Stewart, Emily. “What the Republican Tax Bill Did - and Didn't - Do, One Year Later.” Vox, Vox, 22 Dec. 2018, www.vox.com/policy-and-politics/2018/12/18/18146253/tax-cuts-and-jobs-actstock-market-economy. “US Tax Bill: Winners and Losers.” BBC News, BBC, 19 Dec. 2017, www.bbc.com/news/business-42420221. “Trump's Tax Bill: US Senate Passes Reform Legislation.” BBC News, BBC, 20 Dec. 2017, www.bbc.com/news/world-us-canada-42421821. Gruber, Jonathan. Public Finance and Public Policy. Worth, 2018....