Last night the Senate passed the Republican proposed tax plan, a major political victory for Trump and the GOP-controlled Congress.
At the Mises Wire, we have featured numerous articles pointing out many of the fallacies involved with the general debate on the issue of "tax reform." For example, the absurdity of "revenue neutral" reform, the danger of raising rates through eliminating loop hopes, the fallacy of trying to address the deficit through eliminating deductions on state and local taxes, and the general notion that tax breaks can be equated to tax subsidies. While the Republican bill does fall for some of these traps, the result of the bill as a whole is a genuine reduction in the tax burden for the majority of Americans. That is always something worth celebrating.
There are additional benefits to be found within the bill as well.
For example, the elimination of the Obamacare individual mandate is a small, but significant, step to improving the American healthcare system. As I noted in March, when Paul Ryan's attempt at Obamacare reform failed, the rise of direct primary care and other market solutions meant that the best thing the GOP could do is simply provide as much freedom as possible for Americans to opt out of government-managed insurance markets:
Given that this is happening naturally on the market already, the legislative focus for those in Washington concerned about American healthcare should be preventing any future laws and regulations that would destroy this model going forward. Further, rather than trying to completely overhaul Obamacare, simply eliminating the individual mandate tax and allowing Health Savings Accounts to be used for healthcare membership would be subtle ways of empowering the market to revolutionize American medicine. This should be coupled with real tax cuts, not “revenue neutral reform” to help Americans keep their own hard-earned money to help pay for it.
The tax bill is also a significant step forward for American's looking to opt out of government education. A provision, spearheaded by Senator Ted Cruz, expanded 529 education savings accounts so they could be used for K-12 schooling, and not just college tuition. While we have frequently seen Republican education reform packages expand the role of tax-funded charter schools, this measure is the rare victory for true private schools - such as Bob Luddy's Thales Academy - that are able to educate without the strings of the state attached.
Now of course, for all the good the bill does do, there is one thing that it doesn't do: cut spending.
As we've noted over, and over, and over again, we will never see the true benefits of reducing government revenue if we don't couple it with a reduction in what the government consumes. A growing national deficit will have to be paid one day, one way or another. As American history is filled with reminders on the difficulty politicians face in raising taxes, this means we are likely to see the difference made up either by inflation or another form of default. (This likely outcome is why I plan to invest a portion of my tax savings in alternatives to Federal Reserve Notes.)
There are also a number of giveaways that were rewarded in order make sure the everyone fell in line for the vote. Given the track record of Republican moderates like Susan Collins, just about anything she gained from the deal is a loss for the rest of us. Further, tis the season for a number of terrible bills to be passed through DC in the coming week and a half as Washington continues its century-old tradition of eroding your freedom under the cloak of the holiday season. In the words of Kurt Vonnegut, so it goes.
So while this tax plan isn't a silver bullet for all that ails the US economy - and is certainly no sign that the swamp is truly being drained - anything that allows Americans to keep more of their pay check, enables more choice in healthcare, and boosts private competition to government schools is a victory worth celebrating.