New Tax Bill & the Debt Disaster
Thinking in the very short term (and selfishly) I am happy about the newly passed tax bill. The bill eliminates the penalty for not having health insurance. Since I prefer to self-insure and pay my own way in regards to healthcare it will save our family money starting in 2019. This year and next I will continue to pay my way (at full retail) plus another $1,000 in penalties.
What is wrong with the bill? It is true that most middle-class tax payers will save as much as $1,600 a year in taxes. Relating this to the average family income of $70,000 it represents about a 2.3% increase in income. While not that significant, it is an improvement. Families with incomes under $100,000 currently contribute to 20% to federal tax revenues. By comparison, high income families (incomes over $500,000) currently contribute about 38% of the total revenue. These families will lower their taxes by 4% or about $40,000 per year. While this seems to bother my more liberal minded friends it bothers me much less than the big issue.
It is easy to provide a tax cut when you do not have to pay for it. What seems to have been lost in all the rhetoric is the fact that this was not a revenue neutral effort. In fact, the promoters have admitted that the bill will add at least $140 Billion in additional debt per year for the next ten years. Combined with the current annual revenue shortfall of $660 Billion this means that we will add about $8 trillion to the debt by the end of 2027. If we do not take action soon the national debt will approach $30 Trillion by the end of 2028.
As a fiscal conservative and a patriot this is extremely alarming. Is this the legacy that we want to leave for our future generations? If you are a loyal Republican you now have the opportunity to beat your chest in the knowledge that “we” did it. We passed a tax bill that lowers taxes! I wonder if it was worth it?
I have one other issue with what we have done. In an earlier letter titled “Tax Tweaking” I detailed my concerns about our complex & broken system of taxation. I came close to having a hernia when Paul Ryan stated that 90% of tax payers can file their taxes on a post card form. I’m not sure what he had been smoking, but this is far from the truth. I think the $11 Billion tax preparation industry and the $9 Billion IRS Budget would indicate otherwise. There are approximately 69 million tax payers that pay any tax. About 40% of all tax payers file their own taxes (most using sophisticated tax software). This leaves about 42 million that use 3rd party services. If you divide this into the tax preparation industry revenue it equals $260 that a tax payer is taxed just to file their tax return. Surely postcard filings can’t cost this much?