Tax Reform

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Oct. 31, the 500th anniversary of the beginning of the Protestant Reformation, was a public holiday this year in Berlin, which 75 years ago was a witch’s cauldron of Nazi-led hatred. Meanwhile, it was Halloween as usual in Washington, D.C., with Republicans on the verge of introducing a tax reform plan they called a treat and Democrats deemed a trick.

The formal unveiling of the plan on Nov. 2 showed both descriptions to be partly right. Reduction of corporate tax rates may turn out to be a treat for the American economy and for those who are unemployed or underemployed. Movement conservatives were heavily promoting the plan, and they may be right. Movement liberals were attacking it, and they usually have been wrong.

The plan certainly showed how far the GOP has moved in 20 years from the principles of “compassionate conservatism” that Gov. George W. Bush started talking about in 1997. He wanted government policies that promoted charitable giving and adoption. The plan also showed how quickly the GOP has distanced itself from decades of Republican rhetoric about budget deficits and national debt.

The GOP plan as of Nov. 7 includes some tax bracket simplification that will make little difference to most taxpayers. The big change for individual taxpayers is elimination of personal exemptions of $4,050 each. The plan makes up for that takeaway by doubling the standard deduction from $12,000 to $24,000 per married couple, and by increasing the child tax credit from $1,000 to $1,600.

While sitting in an airport early in November, I used my calculator app and saw how those changes may roughly balance out—but a plethora of nuances make precise Person A vs. Person B comparisons tricky. I did see how some changes could affect the behavior of four imaginary couples, each with an annual income of $100,000 and current deductions of $14,000 for property taxes and mortgage interest on their middle-class home:

1. Mr. and Mrs. Watchtaxes have four children and donate $5,000 each year to churches and charities. By itemizing, they currently cut their tax bill by $750. Under the GOP plan they will start using the standard deduction and will contribute $500 less, since they won’t get any tax benefit by doing so—and their kids need new clothes.
2. Mr. and Mrs. Kuyper have no children and donate $10,000 each year to churches and charities. They will also take the standard deduction but despite losing the tax benefit will continue to contribute that $10,000, and may even add to it since their tax bill will be a little lower and the economy is good.
3. Mr. and Mrs. Selfish are big winners: They have no children and donate nothing. They will benefit more from the GOP plan than the Watchtaxes or Kuyper families, because the now-doubled standard deduction gives them the same tax status as those with bigger families or bigger hearts.
4. Mr. and Mrs. Compassion are big losers. In 2014 they used their savings to adopt a child—and received a $4,800 adoption tax credit, the average amount that year. They were thankful for that credit, one of the few lasting results of the GOP’s partial 1995-2001 compassion push. They had planned to adopt another child in 2018 but are surprised that the new GOP plan eliminates the adoption tax credit.

Analysts say the GOP plan, if enacted, will probably reduce the percentage of itemizers from 33 percent to 5 percent. One study predicted a 5 percent decline in contributions to religious organizations, but only God knows what will happen. The Universal Charitable Giving Act of 2017 is still up for congressional consideration: It would expand the charitable deduction to all Americans rather than knock it out for all but a few.

Meanwhile, GOP concern about federal deficits and debt seems mostly dead. In 2012 Senate Majority Leader Mitch McConnell, now blithely pushing to add $1.5 trillion to our national ball-and-chain, called debt “the nation’s most serious long-term problem.” Early last year the Republican National Committee blamed Barack Obama for burying the United States under a “mountain of debt.”

We are buried, and Debt Hill has become the Big Rock Candy Mountain, to bipartisan praise. Congress is singing the 1928 song by that name: “In the Big Rock Candy Mountain / There’s a land that’s fair and bright / Where the handouts grow on bushes / And you sleep out every night.”

Few Christian leaders are speaking out about our new cross of gold. During the Obama administration, the National Association of Evangelicals called for “the President and Congress to demonstrate moral leadership and fiscal integrity in addressing the national debt. This will require extraordinary political courage, bipartisan cooperation and shared sacrifice.”

This year, with a Republican in the White House, I’m not hearing many evangelical admonitions like that about federal debt. Maybe hoped-for economic growth will pull an elephant out of a hat, but political courage, cooperation, and sacrifice now seem as rare as a Halloween trick-or-treater in the costume of an angel.

Marvin Olasky

Marvin is editor in chief of WORLD News Group and the author of more than 20 books, including The Tragedy of American Compassion. Follow Marvin on Twitter 

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