House Republicans under the leadership of Speaker Paul Ryan have done an excellent job crafting – and communicating about – the Tax Cuts and Jobs Act, but there is still a long road ahead.
Ideally, the bill will easily get through the House Ways and Means Committee and be passed by the full House before Thanksgiving. However, conferencing in the Senate may prove more difficult, given our smaller majority.
Republicans must therefore ensure the American people know how remarkably positive this bill is, making it extremely difficult for Democrats, especially those up for re-election, to oppose.
{mosads}Under the bill, lower- and middle-income earners will be able to keep more of their hard-earned income because the standard deduction would be nearly doubled from $6,350 to $12,000 for individuals and from $12,000 to $24,000 for families.
This means anyone who makes $12,000 or less – which is roughly the federal poverty level of $12,060 for individuals – will pay no income taxes. The typical family of four that earns the median household income of $59,000 will see a $1,182 tax cut, according to the Ways and Means Committee. Additionally, families will see the Child Tax Credit increase and those caring for adult dependents will be provided with a $300 credit.
The 25 percent maximum tax rate for small businesses, which make up 99.7 percent of U.S. employers, will boost investment, business expansion, hiring and wages across the country. This, coupled with the bill’s dramatic reduction in the corporate tax rate from 35 percent down to 20 percent, would cause the U.S. economy to experience tremendous growth and prosperity.
Finally, the value of the bill’s aggressive simplification of the tax code cannot be overstated. If passed in its current form, most Americans will be able to file their taxes on a single postcard-sized document, further saving American families both time and money.
If passed, this will be the most important tax reform legislation in more than 30 years. However, Republicans must stay focused and not allow minor policy arguments to derail their progress. They also must overcome two major hurdles that the Tax Cuts and Jobs Act currently faces.
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First, Republicans must fight to ensure the final bill is scored appropriately.
The Joint Committee on Taxation has already provided preliminary analysis for the bill. Its estimates are static and assume tax cuts will have no impact on growth. As a result of this bad assumption, the JCT incorrectly estimates the bill would create a significant budget shortfall – $1.43 trillion over 10 years.
The truth is, our gross domestic product is growing at 3 percent – largely due to deregulatory efforts by the Trump administration and the expectation of tax cuts. Passage of the Tax Cuts and Jobs Act would further spur GDP growth, so the bill should be scored dynamically.
The Tax Foundation has made dynamic estimates on the Tax Cuts and Jobs Act, which show the bill would “significantly lower marginal tax rates and the cost of capital, which would lead to 3.9 percent higher GDP over the long term, 3.1 percent higher wages, and an additional 975,000 full-time equivalent jobs.” This economic growth would raise federal revenues by nearly $1 trillion over 10 years, according to the Tax Foundation. In the end, this new revenue could bring the bill close to neutral, depending on what baseline is used to score it.
This directly relates to the second hurdle: Republicans must make the argument that lower taxes will lead to substantially higher economic growth – and that growth will lead to more prosperity and a healthier federal budget.
Republicans must not take for granted that everyone likes tax cuts. They must fight, and they must win. That victory will only be assured if the American people are with them.
Furthermore, Republicans who have not come on board with the bill should consider one hard reality: Passage of this bill is critical to keeping the GOP majority in Congress.
All 435 seats in the House of Representatives are in play in 2018. We have 27 incumbent members who have left office or announced that they are not seeking re-election. Democrats have only seven incumbents leaving office. To take the majority in the House, Democrats need to gain 24 seats overall.
In the Senate, Republicans hold a slim 52-48 seat majority going into the midterm elections. Senate Democrats have 25 seats to defend, including two seats held by independents who caucus with them. Republicans, on the other hand, have only nine seats up for re-election. The GOP has the political advantage, but there is a paper-thin margin of error.
While Republicans have a geographic advantage in the 2018 midterm elections, it will be difficult to convince voters to elect more Republicans if we fail to pass these tax cuts – especially after the failure to repeal and replace ObamaCare.
In 2006, Republicans had a similar expected advantage. However, Democrats successfully defended every one of their seats, won more than two dozen additional House districts, and gained control of both houses of Congress.
Republicans must remain disciplined and remember that passing serious legislation is very hard work. There is still a great deal to do, and the timeline is incredibly tight. When we passed the first phase of tax cuts under President Ronald Reagan in 1981, it took eight months. Republicans today are faced with a two-month deadline.
If President Trump signs this bill into law by Christmas, not only will Republicans keep their majorities in both the House and Senate, but the United States will enter a new age of prosperity to the benefit of every American.
However, if this tax cut bill is allowed to fail, the future for the GOP will be in peril.
Newt Gingrich is a former Speaker of the U.S. House of Representatives, chairman of the board at Gingrich Productions and a Gallup Senior Scientist.