Grover Norquist
If Republicans delay the Trump tax cuts, they will lose the House.
President Trump said it at every campaign appearance: I want my tax cuts made permanent.
He was clear. If his tax cut bill is not extended — American taxpayers fall back into living under Obama’s tax rates.
Victory requires that there be one “reconciliation bill” that includes the tax cuts, spending cuts, border security and other priorities.
And that bill must pass early next year. Or else.
Imagine you are a small businessman with a factory and 80 workers. Important to your town. Are you going to hire more workers? Expand your plant and equipment? You don’t know. Will the Obama tax rates come back? Every day congress waits to make the tax cuts permanent is a day decisions to create jobs today, tomorrow, and two years form now are being made. Or not.
To delay the tax cut is to kill the tax cut. A return to higher taxes and fewer jobs.
And political defeat in the midterm.
The 2017 Trump Tax Cuts are set to expire at the end of next year. Unless congress acts now.
Failure to act would cut the standard deduction in half. That would damage 90% of tax filers. Forty million families would see their current Child Tax Credit cut in half. A family of four earning $80,610 on average would see a $1,695 tax hike. More than 26 million small business owners would be hit with a 43.4% tax rate.
Despite the looming threat of automatic tax hikes, some politicians are pushing to delay extension of the Trump Tax Cuts
Delaying tax cuts is a mistake Republicans have made before. Twice. Those delays were colossal mistakes.
Republicans spent the first year of Trump’s first term floundering and arguing with themselves. They delayed tax reform until a second reconciliation bill and waisted precious months of Trump’s presidency failing to repeal Obamacare, forced to look on as John McCain turned his thumb down on the Senate floor. Because tax reform was delayed, Trump couldn’t sign his signature legislative achievement, the Tax Cuts and Jobs Act, until December of 2017 – nearly a year into his presidency.
This is not a strategy to be repeated.
In 2019, the year after the Trump tax cuts were enacted, the median household income grew a stunning 6.8% — the largest annual increase on record. Real median U.S. household income that year rose by $4,379 to $68,709, nearly 50% more in one year than during the entire eight years of Barack Obama’s Presidency. The gains were even greater for minority households with median incomes increasing among Hispanics (7.1%), blacks (7.9%), Asians (10.6%). The Trump economy was booming for everyone.
The problem for Republicans?
This historic growth occurred in 2019 – the year after Republicans were wiped out in the 2018 midterms, losing 40 House seats. Republicans would have faced a dramatically more favorable electoral landscape had they been able to enact the Trump tax cuts in the beginning of Trump’s term, starting the recovery a year earlier.
This was not the first time Republicans made the error of delaying tax cuts
It even happened to Reagan. His landmark 1981 tax cuts did not take full effect until Jan. 1, 1983.
When we delayed the Reagan tax cuts it delayed economic growth until after the 1982 midterms. What happened to Republicans in November 1982? They lost 26 House seats. Ouch.
Reagan economist Art Laffer recently noted the problem with delaying the Reagan tax cuts:
“To get the bill through the House and the Senate, President Reagan agreed to phase in the tax cuts. The tax cuts actually began in full on January 1, 1983. It is amazing to me how tax cuts don’t work until they take effect. We had the deep downturn in 1981 and 1982. When the tax cuts took effect – it was literally one minute into 1983 – bam! The boom hit. From January 1, 1983, through June 1984 – an 18-month period — the U.S. economy grew by 12 percent in real terms. 12 percent! We grew at an average annual rate of a little less than 8 percent per annum for a year and a half.”
Today’s situation is no different: Businessmen and women will not invest based on hopes or promises. They need to know now. Are the Trump tax cuts — and Trump’s promise to further reduce the income tax — actually the law of the land? Or not. The sooner the tax cut is the law of land the sooner Americans will see pay increases and job creation. As they saw in 1983 and 2019.
When Trump returns to the White House in January, he will do so with Republicans holding a razor-thin majority in Congress. The House will begin with a 217-215 Republican majority, meaning losing a single vote could kill any bill.
Such tight margins in the House mean any delay to the Trump Tax Cuts not only slows economic growth, but also increases the risk of failure to extend them altogether.
Congressmen get sick. Auto accidents happen. They have scandals. The prospect of upcoming special elections to replace House members joining the Trump administration adds more uncertainty. Republicans should be reminded that in 2017 we managed to lose a Senate seat in Alabama. That’s right, Alabama.
Republicans should be locked in on passing Trump’s tax cuts and preventing the largest tax hike in American history while they can guarantee a working majority.
Grover Norquist is president of Americans for Tax Reform.
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