The ongoing budget discussions in the House of Representatives have brought the Tax Cuts and Jobs Act (TCJA) back into the spotlight. First enacted in 2017, the TCJA roughly doubled the number of tax brackets and changed the income ranges significantly, reshaping the tax landscape. Republicans have not just willy nilly stumbled into a shared consensus. The discussion on whether to make them permanent has flared up, revealing deep rifts within the party and across the aisle.
The TCJA’s new tax structure boondoggle created seven income tax brackets, which apply different rates of taxation to a taxpayer’s taxable income. Although most Republicans are clearly in favor of keeping the existing no-bid framework, some have reservations about making it entirely impossible to change. Critics say that simply maintaining the TCJA structure as is, without any meaningful changes, would be a misguided approach. To start, they call for preserving the three lowest individual income tax brackets. They argue the rest of the brackets should be increased to pre-TCJ levels.
In their efforts to advance a reconciliation budget bill, Republicans have a twofold challenge. At the same time, there is a deep and powerful desire to make major cuts to federal spending. This proposal will help shrink the deficit. A faction within the party resists these cuts, particularly when they affect safety net programs that support vulnerable populations. In short, this internal conflict makes their approach to tax policy confusing at best.
For the Republicans, it’s pretty clear that the central organizing principle is to make the rich much richer courtesy of tax cuts. In fact, nearly all Democrats support cutting targeted tax cuts to help close the income and wealth gap. Such a position is a radical departure from the other side’s position. These competing priorities illustrate the often overlooked but intense conflict over fiscal policy and economic equity.
While they’ve approached the issue from different angles, both parties acknowledge that any move to make the TCJA tax cuts permanent can’t happen by itself. Fortunately, lawmakers on both sides of the aisle have long recognized that these kinds of cuts would require offsetting spending in other parts of the budget. Yet, this recognition is a big deal – talking about needing consensus on difficult, hairy tax policy in the face of often-opposing economic philosophies.
As deliberations continue, the Republican commitment to extending tax cuts will be tested against their desire for federal spending reductions and internal party divisions. These negotiations will have huge implications for future tax policy. They will be a reflection of the broader, still-ongoing ideological battles over what this nation’s economic priorities should be.