If you’ve landed here, you are probably painfully aware of the meaning of the acronym TCJA.
The Tax Cuts and Jobs Act of 2017, which was signed into law just in time in December to go into effect for the first year of 2018.
The politicians that pushed this through touted all of the new jobs it would create, and how much less tax the average American would pay.
Did it create a whole bunch of new jobs?
I found a couple of scholarly papers that bring in a median difference at less than 1%, and honestly, can we really know those jobs would have not been created anyway?
It’s all just pedagogical conjecture. In plain English, who the heck knows, really?
Did it really cut taxes? Absolutely, if you’re on the board of a C Corporation.
The biggest effect of the Act was to drop corporate tax rates from 35% to 21%.
Does this translate to more money for the common man?
No, in this author’s opinion.
We’ve been fed the trickle-down theory of economics since the 80’s, and if you’re still buying that I hear Lucy Van Pelt has a football for you to kick. She’ll hold it for you, honest!
Cutting taxes for the wealthy makes the wealthy more wealthy.
I mean, really, it even makes a kind of sense, like it or not.
One small thing in the Act we do like, even though in typical congressional fashion it got hopelessly obfuscated, was the introduction of the Qualified Business Income Deduction.
I can see that hanging around in the future. I think the general run of people like it, much as they do the Earned Income Tax Credit.
Is There Hope for the Future?
Are we stuck then, with an albatross of unclear tax policy hanging around our necks?
Fun fact about our much-debated current tax legislation:
It has an expiration date, upon which Cinderella’s coach turns back into a pumpkin again.
That date is December 31, 2025.
In the absence of new legislation, we’re going back in time again, to 2017, albeit with what I’m certain to be adjustments for inflation.
Remember the personal exemption? It’s been so long that I don’t blame you if you don’t. This actually benefitted middle Americans who itemized deductions to reduce tax with home mortgages.
Do you understand why? Personal exemptions were added to a smaller standard deduction to arrive at a taxpayer’s actual taxable income, and with an almost-doubled standard deduction, less than 10% of Americans are now able to itemize.
They didn’t talk about this much when they were bragging about getting it passed, did they?
The average mortgage rate is going up. In case you live under a moist smelly rock somewhere and haven’t heard.
Personal exemptions would return in 2025, reducing the standard deduction. Again, assuming someone doesn’t create new legislation by then.
Oh boy. Legislation.
That smells like another trip to the halls of the U.S. Congress.
The master of puppets, that pulls the strings of the marionette that is the Internal Revenue Service.
Thank you, Metallica, for the colorful imagery.
Did you know that Article One of the Constitution gave these folks the power to tax?
Over a century before the national income tax stuck for good in 1913 with the passing of the 16th Amendment?
Folks, we live in a republic, and my timing for this article is no accident.
We don’t make the rules.
We vote for people that do that for us.
It’s an awesome responsibility, and it is fraught with purposeful deception.
We vote in two days, and people are hanging by their fingernails in anticipation.
The House may shift power. Which means there’s a chance it may not as well.
Even the Senate balance of power is not a foregone conclusion.
If you have a strong feeling about how you’d like your taxing authority to treat you in the next two years, you’d better educate yourself.
Do some deep critical thinking…
…and, for the love of God get out and vote.
If you came this far, perhaps you’re interested in which way I’m leaning?
If I haven’t made it clear up to now, here you go:
The TCJA of 2017 benefited mostly the rich, and high-middle income earners of America.
Many of whom are our friends and/or clients, for sure.
But, even at higher income levels you aren’t completely immune to the progressive tax.
I honestly think if you analyzed your net income, the tax you paid and your effective tax rate in a statistical analysis from 2016 to present you’d be surprised how little you’ve actually gained, and I’m talking to people in the $400,000 to $1,000,000 per year range.
Congress is in the business of soaking as many people as possible in incremental amounts, wrapping it in pretty paper, and calling it a gift, but what they’re really doing is picking your pocket on a crowded street.
If you go to the polls with the intention of voting out the current power because of inflation let me share something else with you: what do you really think sparked that inflation in the first place?
Hint: it has something to do with giving away trillions of dollars of free money.
It happened twice in 2020 and once in 2021, so don’t go blaming “one person” for it.
See what I’m saying? Two different administrations, two different Senate majorities.
Even you are responsible, as am I.
We get the government we deserve.
Go do something about it on Tuesday.
And, if you’re in a state with common sense like mine, Colorado, and you can fill out your ballot at home while researching the best choices to drop it off early?
What are ya waitin’ for?
Have a most prosperous and grateful day folks, and we wish you a peaceful and joyous Election Day as well!