OPINION: There ain’t no free lunch — The GOP tax plan

Isaac Martin, Political Contributor

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There once was an old king who yearned to pass down the wisdom of the ages to his people before he passed on. He spared no expense in assembling the finest cohort of professors, philosophers and thinkers the kingdom had ever seen to condense that wisdom into a palatable size. After five years of debate and discussion, the cadre of intellectuals presented the king with six magnificent, massive tomes lined with maxims and musings from sages, scholars and savants.

Despite this vast array of knowledge, the king remained unimpressed: Few among his subjects would read one let alone six of these volumes. So began 10 long years of writing and rewriting, condensing and crystallizing until one aged economist hit upon five words which seemed to encapsulate nearly all the wisdom of the ancients.

The well-worn phrase he settled upon, “there is no free lunch,” reveals a truth as intuitive as elementary math and as inviolable the law of gravity. This expression is sometimes referred to as “Economics in five words” and will serve as the theme for this column’s next three installments as we examine tax policy, college tuition and healthcare.

On Thursday, Nov. 9, the U.S. Senate Finance Committee released a new tax plan drawing no shortage of criticisms. But, there are some positives.

The Senate plan, unveiled a week after its counterpart in the House of Representatives, shares many of the same salient features. The most prominent among the commonalities is a sharp decrease in taxes on businesses from 35 percent to 20 percent, though the Senate plan delays the cut till 2019. Both plans also give fairly large cuts to low income earners; the nonpartisan Joint Committee on Taxation posits that taxes would decline by 10.4 percent for those earning between $20,000 – $30,000.

Additionally, the standard deduction is being raised from $6k to $12k, a massive increase for the 70 percent of Americans who opt for this simple approach to taxes.

The differences primarily center on deductions individuals can claim on their income tax. In the upper house, Senators from many purple states are voting “no” on the Senate’s plan because it would hit their constituents hard. Currently, these taxpayers suffer from steep state and local taxes, but are able to deduct those from their IRS filings. The Senate plan would eliminate that break, though the House plan would keep it. Additionally, the House cut deductions on medical expenses and interest from student loans.

Conservative leaders in the House appear primed to acquiesce to the Senate’s plan. “I see us taking it,” said Rep. Matt Gaetz (R-Fla.) last week. “If you look at every major issue that comes before the 115th Congress, we do what the Senate wants.”

However, this does not add up to a conservative capitulation, says Rep. Dave Brat (R- VA).

“Our red line as a caucus will be, we basically have to stay with the framework,” he said, citing a 20 percent corporate tax rate and a middle class tax cut among other items. “If the agreement fails to achieve those basic metrics, then this group, and I think many more in our conference, will cross the red line fairly quickly,”

There is no clear reconciliation between the two plans. In the long run, this plan would decrease the Federal revenue by approximately $309 Billion. As with everything, reducing the average American’s taxes comes at cost.

There ain’t no free lunch.