Weekly Opinion Editorial
BEAUTY OR BEAST?
by Steve Fair
President Trump’s ‘one big beautiful bill’ (HR1) passed the Republican controlled
U.S. House last week by one vote (215-214), with five Republican House members
voting no (2), present (1) or not voting at all (2). It now heads to the Senate, where it faces
some opposition. The text of HR1 is
available at: https://www.congress.gov/bill/119th-congress/house-bill/1/text
for those interested in the details.
HR1 makes permanent the 2017 Trump tax cuts. It cuts taxes by an additional $1,300 for a
family of four and removes the tax on tips and overtime pay. HR1 allows an American family to fully deduct
auto loan interest for American-made cars. It also increases the standard
deduction by $2,000 for every American family.
It increases the Child Care tax deduction.
But the 1,116-page bill does not remove tax on Social Security, as has
been wrongly reported. Social Security
can’t be changed through a budget reconciliation process. HR1 does contain a provision where people
over age 65 could deduct an additional $4,000 from their taxes if they make
less than $75,000 or $150,000 filing jointly.
Three observations about HR1:
First, HR1 will get changed in the Senate. Senator Ron Johnson, (R-WI) and other
Republicans, have criticized the spending in the bill. Johnson wants deeper cuts, calling for government
agencies to go back to pre-COVID spending levels. “This is the weekend we honor the service
and sacrifice of the finest among us. I
don’t they served in sacrifice to leave our children completely mortgaged,”
Johnson said on CNN Sunday. Johnson, a
fiscal hawk, exhorted his fellow senators to be ‘responsible’ and reminded them
the first goal of a budget reconciliation process should be to reduce the
deficit.
HR1 does cut Medicaid (not Medicare) funding by up to $1 trillion and requires
more stringent provider screening requirements.
A significant amount of taxpayer dollars are spent providing medical
care for illegal immigrants and HR1 seeks to stop that expenditure.
The Congression Budget Office (CBO) estimates HR1 will increase the
budget deficit by $3.8 trillion next year. Speaker Mike Johnson, (R-LA) says those
estimates are inflated and the CBO did not factor in the economic growth HR1
will create. One thing is certain- HR1 likely
faces modification before it gets through the Senate.
Second, HR1’s success hinges on U.S. economic growth. The House Ways and
Means committee estimates HR1 will increase America’s GDP an average of $850 billion
annually over the next decade. One
reason for the projected growth is the extension of key Trump economic tax
policies for small businesses the Biden administration had rescinded. Reduction of regulations on energy
productivity is expected to lower energy costs and increase consumption. Whether the tenets of HR1 will result in the projected
growth the Trump administration expects remains to be seen.
Third, the devil is in the details.
Simple things can often become complicated and problematic. Overlooked details can be the source of failure. In a bill with over 1,100 pages, specifics
are crucial for success. Unintended
consequences are the axiom/motto of Congress.
While HR1 has some excellent provisions, it’s the undetected fishhooks
that snag taxpayers.
HR1 includes measures consistent with ‘supply-side economics,’ aka Reaganomics. With tax cuts, incentives encouraging work and investment and focus on supply, HR1 is similar to the approach President Reagan took to combat record inflation in the early 1980s. It worked, despite critics who said it helped the wealthy in the U.S. the most. If HR1 doesn’t work, the beautiful bill will be the beast.