Okay, okay, I’ll talk about the tax bill

PapersPhoto courtesy of Seiichi Kusunoki

I’ve been avoiding it. I haven’t wanted to talk about it. I wanted to bury my head under a pillow and forget about the whole thing.

But, alas, it’s just too relevant to our work here.

So I’m going to talk briefly about the new tax bill that was just passed by Congress.

There are numerous full breakdowns about the bill (and plenty of people breaking down too), and I won’t claim this to be a full assessment. (Here’s one and here’s another oneif you’re curious.)

That said, I think some words are in order for something that affects every single one of us. This is, after all, our new reality.

Who will benefit?

The fascinating thing about this bill is that it spreads out the benefits or harm all over the place. For example, if you own a home, you’ll be in a different position than someone who rents, but where you own a home and how much you pay for that home will make the difference between being unaffected and totally shellacked.

So the winners and losers could be living right next to each other.

Who will obviously lose?

People who live in blue states. The cap on the state and local tax deduction to $10,000 in effect penalizes Democrats, who as a rule tend to live in areas with higher taxes. (We might grumble, but I think most of us like the things that higher taxes give us, like a more just and generous society.)

But it’s one thing to like taxes, and it’s another thing to get walloped with a huge unexpected tax bill. Because even though the tax brackets have changed, and the standard deduction has doubled, if you’re paying (say) $20,000 in combined state/local/property taxes, you now need to pay income taxes on the top $10,000. That’s thousands of dollars. Will that slack be taken up elsewhere?

It’s hard to deny the sense that this is policy based on spite. Find a way to target people who disagree with you politically, and charge them highly for it. So what if we mess with the housing market, job market, and people’s quality of life? Should have voted red, libtards.

Who will obviously win?

“Rich people. Duh.” – Tax Policy Center

I’ll be fine, thanks

To be honest, I have no idea how I’m going to fare under this new policy. I think it’s probably going to be a bit of a wash, with the extra tax savings being offset by fewer deductions.

But even if I need to pay lots more taxes, I’m not worried. I’ll be okay. I make good (certainly good enough) money, and if I have to pay more of it to keep the lights on in our government, then so be it.

I’m not the people I’m worried about though.

Here’s who I’m worried about

We all know that people of modest paychecks are going to be only minimally affected by these changes in the short term. (I’m waiting for people to see their extra $20 in their paychecks and say to themselves, “all that effort for this?”)

It’s the long term that worries me.

As we all know, even if we don’t like to realize it, we are all recipients of government benefits. If you’ve needed to use your benefits, you know how important they are. And if you haven’t, you likely will. And if you don’t, then someone who has thanks you for paying into it. You’ve made our world a little bit better. Thank you.

The problem is that we’ve cut taxes without replacing them with anything. Some people believe that the economy will magically grow to fill the self-inflicted financial void, but most of us believe that we just blew an ever larger hole in the budget.

But even that isn’t what worries me. Unlike Greece, we print our own money, so we have control over what happens to it. Massive inflation didn’t happen in the financial crisis (despite assurances that it would) and it won’t happen now.

So a big deficit, and by extension the national debt, isn’t the problem. The problem is that some people will use this as an excuse to hurt people they don’t like.

As in, “we have this big debt problem now, so clearly the only solution is to cut benefits for poor and disadvantaged people.

This isn’t me being hyperbolic. Here’s Fox News saying as much.

So, alas, we continue to live in a world where people in power try to hurt those without power in order to enrich themselves further.

So what to do now?

First, relax. I don’t believe that anything catastrophic is going to happen come January 1st. (Unless the entire IRS says “screw it” and all quits at once.) You might get a little extra money, you might get a little less money, but I predict very few will be severely affected.

Second, educate yourself. The rules have been changed. The game is different. It’s up to all of us to learn how things are different so we can better take care of ourselves and each other. Don’t be caught out by financial changes you could have foreseen.

Third, vote: Seriously. You don’t think that voting matters? After all that’s happened over the last few years? If you like the course we’re on, vote for the people who got us here. If you don’t, vote them out. The next big election is in November. Be there.

Remember that things can change quickly, and that long predictions seldom bear out. All the tax cuts for individuals are scheduled to expire in 2025, eight years from now. That would be cruel and pointless, but I highly doubt that nothing will change between now and then.

For contrast, remember where we were eight years ago? Almost exactly eight years ago, the Affordable Care Act was signed into law, which meant that lot of people had insurance who didn’t have it before. Yes, it’s not perfect, it’s not cheap, and it’s not enough, but think of the sheer will that it took to pass major legislation that at least tried to help people of limited means. Maybe eight years from now we’ll be celebrating a similar legislation that helps people who need it.

In the meantime, keep fighting.

Is there any topic that you’re curious for me to dive into further? Please comment below or send a message and I’ll get on it. As always, thank you.

Mike Pumphrey

Mike Pumphrey

I'm the founder and author of Unlikely Radical, a site to help people succeed with money, achieve their goals, and live intentionally.

I offer a free phone consultation to anyone who is interested in changing their financial narrative. Are you ready? Click here for details.
Mike Pumphrey
Posted on January 1, 2018