Taxes: What Was Promised And What Was Delivered
DAVID GREENE, HOST:
Congress is set to pass sweeping tax cuts that will reshape the U.S. economy. The bill has passed both houses of Congress and is just one procedural vote away from heading to President Trump's desk. And he's expected to sign the measure this week. Let's talk about the impact of this bill with NPR senior business editor Uri Berliner, who's with us. Hey, Uri.
URI BERLINER, BYLINE: Hi, David.
GREENE: So one way Republicans are selling this plan sounds great. They're saying this - you know, the tax code is monstrously complicated. This is going to simplify it. Is that true?
BERLINER: True simplification? No. You know, under current law, there are seven individual tax brackets in the GOP plan. Guess what? We still have seven brackets. That...
GREENE: Not much of a reduction in brackets.
BERLINER: ...That hasn't changed. And, in some ways, the tax system's about to get way more complicated. You know, accountants in the IRS are going to really have their hands full, especially dealing with these big changes in how businesses are taxed. But there's at least one way taxes - filing taxes will get simpler. Fewer people are going to itemize - you know, take deductions for things like charitable contributions and mortgage interest. Right now, about 30 percent of households do that. That's expected to fall to 10 percent or even lower, so more people are going to use those shorter forms.
GREENE: So what are the big changes here in store for, you know, average taxpayers in the country?
BERLINER: So for people, tax rates will go down, at least for the time being, though it's going to be a larger standard deduction. That's the amount you can automatically take off your tax bill. But a lot of people will no longer be able to pare down their tax bill by taking these big deductions for state, local and property taxes.
GREENE: And that's where we pick up the argument the Democrats are making - that, you know, sure, many - most Americans will see something, but if you lose those deductions and you start looking at the details, you know, this is really favoring the wealthy and businesses more than regular taxpayers. And let me ask you to fact-check that. I mean, are these cuts mostly going to companies, as critics are saying?
BERLINER: The cuts are mostly going to companies. The cuts for individuals, they're slated to end after 2025. And the business tax cuts are supposed to be permanent. And beyond that, you know, there are these big changes for companies like a big cut in the corporate tax rate from 35 to 21 percent. So what we're about to see is this real-world test of this core Republican and conservative idea - the idea that cutting taxes for a company isn't just good for the companies themselves, that it's going to be better for workers and their families. If you lower taxes, companies will invest more. They'll hire new workers. Wages will rise. And the economy will grow faster than it has since the recession.
GREENE: Yeah. I think even Stephen Moore, the Republican economist, has said that it's a gamble, I mean, to see if their argument actually works out in the way that they want it to and hope it will.
BERLINER: Yeah. We're about to see in the real world whether it's true or not.
GREENE: Republicans also have suggested these tax cuts will more or less pay for themselves and not increase deficits. What do you - what about that argument?
BERLINER: The evidence for that is very thin. Virtually all independent analysts say the tax cuts will increase deficits even if the economy grows a little bit faster than expected. So now you have a situation where Republicans, they're supposed to be the party of fiscal responsibility, they - basically gone silent about the deficit. And Democrats are talking about it a lot. It's something they haven't really done in the past.
GREENE: NPR senior business editor Uri Berliner. Uri, thanks.
BERLINER: You're welcome, David.
GREENE: And later this afternoon on All Things Considered, we'll hear how the tax overhaul will affect the IRS. You can listen on your local public radio station, or you can ask your smart speaker to play NPR. Transcript provided by NPR, Copyright NPR.