TCJA Extension and Permanency Is About Promoting Growth And Abundance for All, Not Class Warfare

The goal of pro-growth tax reform is to broaden the tax base and lower the overall tax rate. The Tax Cuts and Jobs Act fulfilled this by eliminating many tax subsidies and carve outs that skewed towards benefiting high earners. The existing tax code is rife with provisions that reduce prosperity. 

The Tax Cuts and Jobs Act of 2017 (TCJA) was the first effort in decades to comprehensively address this problem. It deserves to be permanently extended.  

TCJA was a tax reform package aimed at spurring economic growth, not simply reshuffling the federal tax burden. It provided broad benefits across American society by:  

• Lowering the corporate income tax from 35 to 21 percent making U.S. companies much more internationally competitive. Anyone working for or investing in an American corporation benefited from this rate cut.  

• TCJA also slashed individual income tax rates across-the-board, improving incentives to work, save and invest.  
  • As more workers enter the labor force there is less reliance on public assistance and government spending falls, lowering everyone’s tax bills.
  • More workers also means more goods and services which provide more choices and lower prices.
  • The key to higher wages is higher productivity. Increased savings means a larger pool of funds from which companies can borrow to invest in newer, more productive offices and factories which incorporate the latest technology.  This boost wages across-the-board

• Prior to TCJA businesses large and small were effectively taxed when they invested in new, wage enhancing plant & equipment or engaged in research & development. TCJA changed this by allowing firms to immediately deduct such investments. This produces broad benefits across society, both in terms of higher wages and better products.  

• To help offset the cost of these pro-growth tax reforms TCJA broadened the tax base by capping two of the most regressive loopholes in the tax code, the state and local tax (SALT) and mortgage interest (MID) deductions. Both of these measures effectively transfer income from low- and modest-income Americans to the well-to-do.   

There are numerous additional sources of additional savings by limiting tax giveaways or subsidies that disproportionately benefit the wealthy. 

• Fringe Benefits: The federal tax code allows employers to provide employees with in-kind benefits that are not subject to tax. These range from health care plans that provide many more benefits than the typical plan to a $22.8 billion for a “qualified parking fringe benefit” that lets companies write of the cost of parking.  Such benefits primarily accrue well-to-do and if taxed could potentially bring in trillions more additional revenue over the next decade. 

• The state and local tax (SALT) deduction is mainly used by the wealthy. According to analysis, removing the SALT cap would primarily benefit the top 0.1% of Americans. Three quarters of the benefit would go to people making more than $430,000 annually. Only 10% of Americans choose to itemize their deductions rather than take the standard deduction ($15,000/$30,000 in 2025). 

• The Mortgage Interest Deduction gives the top 20% of mortgaged homeowners four times the benefit as the poorest 20% of homeowners. Prior to the TCJA cap of the deduction at $750,000, the deduction cost $380 billion annually in foregone revenue. The Mortgage Interest Deduction is also only available to those who itemize, and itemizers tend to be very wealthy. 

• Tax-free Municipal Bonds: The federal tax code exempts the income earned from certain municipal bonds from federal income taxes. This loophole is almost exclusively used by high-income individuals. Over the next decade it is expected to cost the federal government some $280 billion in lost revenue. 

• Energy Subsidies: The federal tax code provides numerous energy subsidies the primarily accrue to the affluent. Trimming these could save as much as $164 billion over the next decade. These include: 
  • The electric vehicle tax credit is generally used by upper income earners.  According to 2020 tax data, 80% of the credit is used by people making over $100,000. 
  • Energy efficient home tax credits are predominantly utilized by the wealthy. The top 25% of earners have used 66% of energy efficiency tax credits totaling $5.5 billion in tax expenditures. By comparison, incomes below $25,000 received only $32 million in tax benefits. These tax credits subsidize heat pumps and air conditioners for the wealthy. 
  • Tax deductions for energy efficient commercial buildings give $6.6 billion in tax cuts to commercial building owners.

Health (tentative pending text) 

• Expanding HSAs will give Americans of all income levels more control over their health care choices, loosening the grip of invasive insurance, government, and employer bureaucracies.  

• The Medicaid changes will restore the program’s focus on serving low-income families and expecting mothers, disabled Americans, and those requiring long-term care. This includes reasonable work requirements and fixing the disparity where states get 7 times more federal funds for able-bodied, working-age, childless Obamacare expansion enrollees than for traditional enrollees per $1 of state spending. (Source: Brian Blase) 

Energy 

• Clearing barriers to the production of domestic energy of all kinds will lead to good-paying jobs and strengthen communities where energy is produced and processed. 

• Energy abundance will reduce utility costs and improve reliability for households and businesses, which will boost worker productivity and living standards. 

• Phasing out Biden’s Green New Deal programs will end Wall Street tax credit brokering that increases prices and reduces reliability while freeing the human, physical, and financial resources to produce proven, low-cost energy and critical national security materials.