U.S. Rep. Barry Loudermilk pitched the Republican tax reform legislation at a Dec. 4 Sandy Springs Rotary Club lunch, drawing applause for the overall tax-cutting concept, and also a critical question about its massive deficit-boosting effect.
The Tax Cuts and Jobs Act will be law by Jan. 1, Loudermilk predicted, saying that “hopefully, we’ll give the American people a big Christmas present” in the form of Congress passing a reconciled bill from the House and Senate versions.
Loudermilk, a Republican whose 11th Congressional District includes parts of Buckhead and Sandy Springs, claimed the legislation’s combination of middle-income and corporate tax cuts will boost economic growth enough to reduce its own deficit increase and improve everyone’s lives. He also confirmed hopes – or fears, depending on one’s situation and politics – that the next step is spending reform for Medicare, Medicaid and Social Security.
Speaking in an interview as he quickly left the lunch, held at the Hilton Atlanta Perimeter Suites hotel, to return to Washington for more work on the legislation, Loudermilk addressed concerns that corporations would spend tax-cut gains on dividends or stock buybacks, not on growth or wage increases.
“You can’t control it, but there’s no hope in getting the economy going if we don’t get the businesses, the wealth creators in this nation, the ability to keep more in their back pocket,” said Loudermilk. He added that he “hopes and believes” that businesses understand they must expand “and not just invest in their own portfolios, but invest into the employees.”
“I could understand it if all we were doing was just giving a corporate tax break — you could make that argument,” Loudermilk said. “But the bulk of the tax reform is giving middle-income Americans a significant tax cut.”
Those middle-income cuts are written to expire after several years – just one of many details in the tax reform bill that are in flux and whose predicted effects are the subject of argument and controversy.
Loudermilk said his own preferences would be a balanced budget amendment, eliminating the IRS and establishing a flat-tax system, but added that none of that is politically viable now.
He also touched on other political issues, indicating that Republicans will try again to repeal and replace the Affordable Care Act, and paying tribute to the “Make America Great Again” era while not directly praising President Trump.
The Tax Cuts and Jobs Act would be the first major federal tax reform since 1986. The basic concepts are reducing and simplifying: permanently cutting the corporate tax rate from 35 to 20 percent; reducing most household tax rates; and increasing the personal deduction and child tax credits while reducing or eliminating many other deductions.
One or both versions also contain various provisions with a more political bent, such as opening the Arctic National Wildlife Refuge in Alaska to oil and gas drilling, and lifting the prohibition on political campaigning from churches and other nonprofits.
The effect on any given household could vary widely depending on many factors. Loudermilk said he has heard from constituents concerned about the loss of specific deductions who then are placated when hearing tax cuts would make up for it. Democrats and some analysts have said that many middle-income households eventually would pay higher tax rates to make up for the cuts, or spend more due to eliminated deductions, and that the very wealthy are the longest-term beneficiaries.
“Will every single American see a tax cut? No,” Loudermilk said. But, he added, “Under both [House and Senate] plans, middle-income Americans will benefit the most … Don’t believe what you’re reading out in the media.”
As examples, he said that couple making $11.50 an hour “won’t pay a dime in taxes,” and neither will his son, who makes $40,000 to $50,000 a year and will see a doubled exemption for his children.
On the other hand, many people making $1.5 million or more a year will have higher taxes – that is, “If their financial behavior stays the same” and they don’t take advantage of other savings, Loudermilk said. And smaller “pass-through” businesses –such as sole proprietorships and partnerships –“may not see as much benefit.”
The overarching benefit of the tax reform, Loudermilk said, is economic growth as measured in terms of the gross domestic product. According to the U.S. Bureau of Economic Analysis, GDP had an annual growth rate of 3.1 and 3.3 percent in the last two quarters. Loudermilk said he expects the tax reform to boost that to well over 4 percent.
“What it all boils down to is, do you get the consumers buying again?” he said in the interview. “If the supply’s there, then those corporations have no choice, if they want to stay in business, [except to] get out and expand and meet the needs of the people.”
A downside that the Republicans themselves acknowledge: the plan will increase the federal deficit — currently about $440 billion a fiscal year, with a national debt of about $20 trillion — with estimates ranging from $500 billion to $1.5 trillion over 10 years.
An audience member asked how Congress would tackle that, adding, “Please don’t tell me, ‘economic growth,’ because they’re not tied together.” But that was Loudermilk’s answer – along with some kind of “reform” to entitlement spending.
“Yes, there is going to be a deficit [increase], but it is going to be an investment in the American people,” Loudermilk said, describing economic growth as the only currently viable tactic to reduce the deficit.
“The next phase of that is, we have to address mandatory spending,” Loudermilk said. “Medicare, Social Security, Medicaid — we have to reform those, there is no question … The reforms have to [be applied] where they don’t affect those who have already invested … But we have to have a long-term vision of the next generation coming.”
“We kind of fell on our face fixing the healthcare crisis we have in this nation,” Loudermilk said of the Republican Congressional majority’s failure earlier this year to repeal and replace the so-called Obamacare healthcare policy. But he indicated that Congress will try again, likening the situation to the Revolutionary War and World War II.
“Look, failure is just a key ingredient to success,” he said. “Do you realize George Washington lost more battles than he won? … Pearl Harbor was a disaster … but four years later, the Japanese were surrendering to us.”
Loudermilk said the current Congress, and especially the House of Representatives, have been historically productive, but has done a poor job of publicizing that, and praised House Speaker Paul Ryan as a “revolutionary thinker” and collaborative leader.
Loudermilk criticized the media for misjudging Congress by old standards in a new political era and thus missing its successes. He told the audience that “what you are experiencing right now is a movement … and that idea was ‘Make America Great Again.’” That Trump campaign slogan was undefined, he noted, but “tapped into frustration” that won votes even from people who “may not have personally liked the president.”
Loudermilk gave credit to the House’s current effectiveness to Ryan rather than Trump, whom he noted ultimately signs the laws it produces rather than creates them. The current tax reform legislation is based on a plan submitted by the Trump administration.