Former Reagan Budget Director David Stockman is warning savvy investors not believe everything they hear from Congressional Republicans who have touted their tax reform bills as a way to stimulate economic growth and job creation by reducing taxes on the middle class and corporations.
“This is an economic dud, it is a political landmine and it is an ideological imposter parading as a Reaganesque supply-chain tax cut when it’s nothing like that,” Stockman told Fox Business Network’s Neil Cavuto.
“It’s a wish list of businesses and Wall Street,” said Stockman, who was the Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan.
The Republican-controlled U.S. Congress approached a major test on Thursday of its ability to enact sweeping tax cuts, as lawmakers prepared for their first full-scale vote on tax legislation, Reuters explained.
Republicans in the House of Representatives were expected to take up their bill to cut federal tax rates on corporations, small businesses and individuals after meeting with President Donald Trump, who wants to sign a tax package into law before year end.
U.S. House Speaker Paul Ryan told Fox News early on Thursday he was confident his chamber had the votes to pass their version of the plan.
However, Stockman warned that it could contribute nearly $1.5 trillion to the national deficit if either the Senate or House plan passes.
Republicans have tried to sidestep that argument by pointing to the corporate tax rate reduction, which they say will incentivize business owners to increase employees’ wages, and thereby increase spending, FBN explained
But history shows that when given tax breaks, shareholders and owners will probably invest that money in buybacks and dividends and other returns to capital, FBN reported.
“That’s why Wall Street is foaming at the mouth for this,” said Stockman, who served as a Republican U.S. Representative from the state of Michigan (1977–1981).
“If the White House economist, who’s nuts, who says it’s going to be $4,000 per family in higher wages, if he were correct, Wall Street would be booing day and night. If you’re going to have lower tax costs and higher wage costs, there’s going to be no change in profits per share and none of this excitement.”
To be sure, Trump continued to be a cheerleader for sweeping tax reform.
“Big vote tomorrow in the House. Tax cuts are getting close!” the Republican president tweeted on Wednesday night.
But Trump’s tax reform hopes have begun to encounter resistance in the Senate, where the Republicans’ narrow majority means they have to keep almost everyone in the party on board, Reuters reported.
The Senate version of the tax bill has faced criticism from some Republican lawmakers, including Senator Susan Collins, who helped sink a Republican effort to repeal Obamacare earlier this year.
Senate Republicans have made the risky decision to tie their tax plan to a repeal of the mandate for people to get healthcare insurance under former Democratic President Barack Obama’s Affordable Care Act, exposing the tax initiative to the same political forces that wrecked their anti-Obamacare push.
Republican U.S. Senator Ron Johnson said Trump called him Wednesday night after Johnson announced his opposition to the current Senate plan over what he said were unequal rates for small businesses and non-corporate enterprises known as “pass-throughs,” versus corporations.
Still, Johnson said he was hopeful a final bill could be passed by year’s end.
“I‘m trying to fix it, and I want to vote yes,” Johnson told CNBC, adding that Trump told him he would meet with Treasury officials on the issue. The president’s public schedule did not list any Department of Treasury meetings for Thursday.
Republicans have long promised tax cuts and they see enacting the legislation as critical to their prospects of retaining power in Washington in the November 2018 congressional elections. Despite controlling the White House and Congress, Republicans so far have no major legislative victories from 2017 to show voters.
“The American people have waited years for a fair, simple, and competitive tax code. Right now, in this moment, we stand on the doorstep of delivering,” Kevin Brady, chairman of the tax-writing House Ways and Means Committee, said during the House tax reform debate.
Democrats have condemned both the House and Senate tax plans as giveaways to the wealthy and U.S. corporations, pointing to analyses showing that millions of Americans could end up with a tax hike because of the elimination of popular deductions. Repeal of or cuts to some deductions is a way to offset the revenue lost from tax cuts.
“This is not a tax plan. This is a tax scam,” said Representative Maxine Waters, a California Democrat.
Nonpartisan congressional analysts have also said the provision to repeal the health insurance mandate in the Senate version would drive up premium costs and cause some 13 million Americans to lose coverage. It also sets individual tax rate cuts to expire while reductions for corporations are permanent.
The Senate and House tax plans must eventually be reconciled and merged into a final plan that can pass both chambers before it goes to Trump to sign into law.
“We’ll find a middle ground and we’ll get it to the president’s desk ... This is a big deal for us,” Republican Representative Tom Cole told MSNBC.
The main challenge facing Republicans remains the 100-seat Senate, where they can lose no more than two votes from their 52-48 majority if they hope to enact tax reform.
Senator John McCain, a Republican who also voted against his party’s healthcare overhaul effort earlier this year, and his colleagues Bob Corker and Lisa Murkowski, are considered critical votes along with Collins.
(Newsmax wire services contributed to this report).
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