I knew that I wasn’t going to like this tweet:
Just In: Only 29 US Senators voted to give working-class families more $$$ from an expanded refundable Child Tax Credit tonight.
— Heather Long (@byHeatherLong) December 2, 2017
There are two types of tax credits, a non refundable and a refundable one. From the Infernal Revenue Service:
What Is a Tax Credit?
Subtract tax credits from the amount of tax you owe. There are two types of tax credits:
- A nonrefundable tax credit means you get a refund only up to the amount you owe.
- A refundable tax credit means you get a refund, even if it’s more than what you owe.
Simply put, a refundable tax credit can be a negative income tax. If your tax liability is zero, yet you have a refundable tax credit of, say, $1,000, you will not only not pay any federal income taxes, but you will also get $1,000 from the government. It is, in effect, simply another form of welfare.
There are several refundable tax credits in the IRS code, including the child tax credit of $1,000 per qualifying child, and the abominable Earned Income Tax Credit. At least you have to be working to receive the EITC, but it still means that the government is taking money from productive people like me — we have been paying federal income taxes in the five figure range for many years — to give to those who didn’t work as hard or were not as productive.
I have stated, many times, that I am opposed to the Republican tax plan working its way through Congress. Oh, I do not oppose the idea of lower taxes; I love the idea of lower taxes! But I am opposed to a plan which increases the deficit. As hard as I opposed the ridiculous deficit spending under our 44th President, I cannot just forget that and support higher deficits under our 45th. I want to see spending cuts first, dramatic spending cuts, before I will support a tax cut.
Alas! I didn’t get my way, at least not yet. From The Wall Street Journal:
Republican-backed plan lowers corporate rate to 20% and reduces individual rates
By Richard Rubin and Siobhan Hughes | Updated Dec. 2, 2017 8:52 a.m. ET
WASHINGTON—The Senate passed sweeping revisions to the U.S. tax code past midnight Saturday after Republicans navigated a thicket of internal divisions over deficits and other issues to place their imprint on the economy.
The bill, which included about $1.4 trillion in tax cuts, would lower the corporate rate to 20% from 35%, reshape international business tax rules and temporarily lower individual taxes. It also touched other Republican goals, including opening the Arctic National Wildlife Refuge to oil drilling and repealing the mandate that individuals purchase health insurance, which would punch a sizable hole in the 2010 Affordable Care Act. But some objectives, such as repealing the alternative minimum tax, fell by the wayside in last-minute wrangling.
“In the end it all came together and we’re pretty excited about what we’ve been able to accomplish for the American people,” Senate Majority Leader Mitch McConnell (R., Ky.) said in an interview Friday. “We’ve got a corporate rate at 20% that we think makes us competitive in the world again and provided substantial middle-income tax relief.”
There’s more at the original. The bill passed in the Senate 51-49, with only one Republican, Senator Bob Corker of Tennessee, who has an undying hatred for President Obama, voting against it, expressing his concerns about the deficit. Every Democrat voted against it.
The President was happy:
Biggest Tax Bill and Tax Cuts in history just passed in the Senate. Now these great Republicans will be going for final passage. Thank you to House and Senate Republicans for your hard work and commitment!
— Donald J. Trump (@realDonaldTrump) December 2, 2017
Investors, for now, are more excited about the prospect of lower corporate taxes than about the risks associated with larger government deficits. The Dow Jones Industrial Average rose 673.60 points for the week, or 2.9%, to 24231.59. Yields on 10-year Treasury notes, which might be expected to rise if bond investors were worried about deficits, remain comfortably low, below 2.5%.
Senators began voting on amendments late Friday night and that continued into early Saturday. They defeated, 29-71, an attempt by Sen. Marco Rubio (R., Fla.) and Mike Lee (R., Utah) to expand the child tax credit for low-income families, which would have been paid for by setting the corporate tax rate at 20.94%.
There’s still a lot more to be done before the tax bill can become law, as the Senate and House versions must be reconciled. But, in the end, we’re going to be looking at a significantly bigger budget deficit. Count on it, the Democrats will be running on something like this:
That the national debt soared from $10,626,877,048,913.08 to $19,947,304,555,212.49, an increase of $9,320,427,506,299.41 under President Obama doesn’t somehow make his argument wrong; it simply means he was a huge hypocrite. We will be paying for President Obama’s hypocrisy for decades to come, and we will be paying for the Republican tax cut bill for decades as well.
More from The Wall Street Journal:
- Tax Changes for Overseas Cash Could Ripple Through Markets
- Deficit Hawks Take a Back Seat
- For Multinationals, the Tax Bill’s Good Likely Outweighs the Bad
- Tax Overhaul: Industry by Industry
- House Tax Plan Isn’t Amicable to Divorcing Couples