House Budget Paves Way for Tax Reform

House Ways and Means Committee Chairman Kevin Brady at CPAC 2017. (Unmodified Creative Commons photo by Gage Skidmore. bit.ly/1jxQJMa)

The House has adopted the recently passed Senate budget which will replace the previously accepted House budget from October 5.

Contrary to the anti-deficit rhetoric espoused by President Trump when he outlined his initial tax bill, this budget resolution raises the federal deficit by up to 1.5 trillion over the course of the next 10 years.

The bill passed the House with a vote of 216-212, and sets the stage for the enumeration of a Republican tax bill on Thursday. The complete details of the plan are still yet to be shared, as only a few key points of the proposed tax bill have been stated.

At the very least, the upcoming tax bill will double the standard single deduction and reduce the number of income brackets from seven to three, with income tax rates of 12, 25, and 35 percent.

The bill intends to fund these tax cuts through eliminating many lesser-known deductions. The potentially eliminated deductions that would have the largest effect are those for local and state income and property taxes.

The proposed elimination of these deductions has created a coalition of moderate Republican representatives from highly populated areas that have sided with Democrats in opposition to this budget. The discord from these representatives will be heard more clearly once there is an actual tax bill up for debate containing these eliminations.

According to a Bloomberg analysis, the tangible effects of this budget have already been felt. The KBW Bank Index, which serves as an index for the stock prices of the banking industry, reached its highest intraday level since before the 2008/2009 financial crisis.

The immediate surge of the KBW Bank Index indicates that many investors and financial institutions are optimistic in terms of the economic impact that the new budget will have.

Congressional debate over this budget has produced partisan rhetoric typical with main-line ideologies from both parties. According to reports from the New York Times, Bloomberg and Politico, many Democrats have come out to say that the increased deficit will benefit the wealthy at the expense of the elderly and the poor through cuts in social spending.

Meanwhile, many Republicans justify the budget in that it will allow them to advance tax reform that further cuts spending and therefore reduces the deficit increase.

Rep. Kevin Brady, R-Texas, who is the chairman of the House Ways and Means Committee, believes that the acceptance of the new budget resolution will provide the “legislative runway” necessary for the tax bill that he and his committee will review this week.

The Republican push for tax reform comes at a time following their repeated failure to “repeal and replace” Obamacare. In such a climate, the Republicans find themselves especially hard-pressed to produce at least one significant legislative achievement during Trump’s first year in office.

The Republican majority in both houses should allow for a Republican-backed tax bill to clear both chambers of Congress and log President Trump a legislative victory, so long as the proposed tax reform does not end up being too divisive.

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