Why you should care
Because it's your money.
They are one of life’s two great certainties, but that doesn’t mean taxes aren’t changing. Local, state and federal governments are constantly tinkering and tweaking. They’re getting into huge battles about who pays for government and how. The tax code is also a war zone for social engineering, creating incentives to have more kids, use clean energy, invest in the stock market, give to charity or buy a home.
Our OZY original series on the future of taxation takes stock of America at a time when tax debates are shifting in unexpected ways. The $1.5 trillion tax cut signed by President Donald Trump at the end of 2017 plays a big role, as it reshaped the playing field. In this series, we’ll explore how the traditional narrative of Republicans pushing to relentlessly reduce taxes and Democrats seeking to hike them at every turn is being upended. There are surprising new ways for our elected leaders to agree and disagree about how they’re coming after your wallet — or sparing it.
In a 40-page report released in May, Sen. Marco Rubio warned that “behind recent positive numbers, there is plenty that isn’t working the way it should.” Then, he became more pointed: “Business investment, one of the most basic economic activities of the free enterprise system, is declining.” On Twitter, Rubio railed against the “financialization” of the economy that emphasized the stock market over ordinary people.
Now, before the 2020 presidential election consumes all things political, more than a few Republicans are preparing bills that they believe will refocus tax reform on people.
Steve Sweeney, who is about to become the longest-serving Senate president in New Jersey history, has a difference of opinion with his fellow Democrat in the governor’s office. Phil Murphy ran on a new millionaires’ tax, a proposal Sweeney also supported … until the Donald Trump tax reform disproportionately hit high earners in high-tax states like New Jersey. So Sweeney is trying to go after businesses instead, and it’s a fight the salty ironworker (who has already bested the teachers unions) is relishing.
Steve Glickman had his eye on economic pressure in the Midwest before the 2016 election — before coastal pollsters scratched their heads at Trump’s election and reporters poured into flyover country.
Beginning in 2013, Glickman and a small team — including former Facebook President Sean Parker — were quietly assembling a coalition for an obscure tax policy later called “opportunity zones.” Then 2016 happened. The lens Glickman was peering through came into national focus, showing a window of opportunity for this wonky policy to resonate with ordinary people.
OZY columnist and Americans for Tax Reform President Grover Norquist sets the playing field for the next phase of federal tax reform — which requires one-party control of the White House and both branches of Congress.
If the GOP reigns, it will make corporate tax cuts permanent and index capital gains to inflation to increase the value of stocks inside everyone’s IRA and 401(k). If the Democrats run the show, their stated goals are to tax energy to discourage its use, tax wealth to reduce inequality and increase total tax take to pay for their plans to dramatically increase federal spending.
The pass-through deduction — and other loopholes introduced by the new tax reform law — do alter the market, turning us “into a nation of tax-shelter hunters,” as Howard Gleckman, an economist and senior fellow at the Tax Policy Center, wrote last year. It’s a very unconservative notion that special tax breaks have led to companies creating models meant to take advantage of government policies rather than to serve the needs of customers.
Offering a decade of tax relief for funds invested in designated “opportunity zones,” the program is coaxing investment in nearly 9,000 communities in all 50 states, spanning neighborhoods with about 30 million Americans, and spawning odd partnerships. Created by a Republican-controlled Congress and the Trump administration, the program has been championed by a lefty pop artist, John Legend; a liberal California governor, Gavin Newsom; and a Democratic presidential candidate, New Jersey Sen. Cory Booker. While Washington politics may be red, blue enclaves from Sacramento to Cleveland to Brooklyn — and nearly everywhere between — have embraced the aid.