I have made very clear in recent posts that one negative feature of the tax bill, increasing national debt by $1 trillion over ten years, greatly outweighs its good features. For this reason I ask Nebraska Senator Deb Fischer to put the welfare of our country ahead of the demands of her Republican colleagues and vote against the bill.
Nevertheless, the tax bill does have beneficial features and I would like to acknowledge them here. Major ones are:
- Lowering the corporate tax rate from 35% to 21% and moving to a territorial system, making us far more internationally competitive and encouraging our multinational corporations to bring their foreign profits back home.
- Establishing immediate expensing of capital investment, thereby speeding up business investment and increasing economic growth.
- Reducing itemized deductions for state and local taxes and mortgage interest, but not eliminating them as should be done for much greater revenue savings.
- Increasing the standard deduction to $12,000/$24,000 (for singles/couples) which will reduce the number of individual taxpayers who itemize deductions from 30% to just 6%. This single feature alone achieves major simplification.
- Measuring inflation adjustments for income thresholds by the Chained Consumer Price Index (CCPI) rather than the current CPI. CCPI takes consumer behavior into account when computing inflation and will lead to an increase in tax revenue over time.
- Eliminating the individual mandate for the ACA which will lead to fewer healthy people signing up for health insurance. This begins a process of healthcare cost reform which must continue much further to significantly reduce the cost of American healthcare. Much more later.
Conclusion. The good features in the tax bill do not nearly outweigh the awfulness of adding $1 trillion to our debt over the next ten years. The Republican Party should be ashamed of itself for such poor fiscal and economic stewardship. What is it thinking?
It Does Not Add Up 
It seems that health spending has moderated substantially for the last 12-15 months, as noted by the Altarum Institute quarterly reports. I suspect that this reflects an unrecognized recession that has been masked by the exuberant stock market released by a less coercive, centralized Federal political leadership along with business supportive fiscal policy. If so, the temporary lag in health spending will rebound in a year to “catch up.” The continued focus on expansive healthcare reimbursement (as in increasing Federal responsibility for risk management by funding state level catastrophic healthcare) will continue worsening our nation’s long standing growth in health spending. This began around 1960 when health spending represented 5.0% of the GDP. Last year health spending represented 18.2% of the GDP. In effected, health spending as a portion of the GDP increased by 5.0% compounded annually and adjusted for economic growth and inflation.
Remember that health spending by the other 34 OECD nation’s clusters primary at 12.0%, some higher and some “at lot” lower. My calculation chose 18.0% for us now and 13.0% as a potential ideal. The 13.0% goal for health spending to stabilize our national economic condition would require that the annual health spending as a portion of the national economy was 0.5% less than economic growth for 10 years.
So the tax reform process is projected to add $100 Billion annually for the next 10 years to our national debt. Remember that our nation’s excessive health spending as a portion of our GDP represented an extra $400 Billion expense to the Federal government for at least the last two years. So, the projected contribution of $1 Trillion over 10 years to our nation’s debt with tax reform is basically TRIVIAL as compared to the potential extra expense of $4 Trillion by our nation’s excessive health spending.
So, smoking, obesity, poverty, violence (especially suicide and homicide), addictions and social marginalization in various levels of intensity throughout each community mean nothing??? Our nation will be in economic and social ruins within 30 years unless we put our nation into a 10 year, 180 degree spin to our nation’s 21st Century current realitues.
A good solution is to migrate from employer provided health insurance to individual health insurance. The mechanism would be a universal tax credit of sufficient size that healthy individuals and families would save money by transferring from employer provided care to individually underwritten policies on the private market. Then both the employer, employee (and family) and government all save money because the tax credit would be less expensive than the cost of the tax exemption for the employee who makes the switch.
Unhealthy habits like smoking, obesity, alcoholism, etc. would greatly raise the cost of the individual health insurance policies and therefore create a large incentive for healthy behavior.
Behavioral economics is a relatively new phenomena for managing universal health insurance. I am aware of the underlying issues about the “rational investor” concept. This is all not exactly understood, certainly not as a means to solve our nation’s cost and quality problems.