Republican Party is taking a big win. They have good reasons to celebrate, though some experts think that the Tax Cut and Jobs Act will be bad and unpopular.
The timing matters in politics, and Republicans chose a perfect moment to approve the tax reform, thinking in the near future. They were in need of a big win, and they will harvest on this one in November 2018, no matter what the opposition is predicting now.
The new Tax system will favor the richest and big corporations as liberals denounce, and it is not going to permeate to the mid class as conservatives predict. But the immediate effect of the reform will be slightly positive for middles class, and it is going to impact the decition of the people in the next mid-term elections in 2018.
Democratic leaders think that voters will punish the Republican Party in November. They are spreading the message that the Tax Reform favors millionaires like Donald Trump, and so far they have been successful. About 60% of Americans are against the tax reform today, but that trend can change very fast.
As soon as in January, most of the workers will see more money in their salary, because they will be paying fewer taxes. The economy will remain growing -in part because of the stability that Trump inherited from Obama´s administration, though he has successfully taken the credit for himself-, Wall Street will keep growing and Republicans will boast about. It is going to be hard for Democrats to convince voters that the little extra money they have in their pockets and the economy numbers are bad for the people.
Yes, the new Tax Code will have a negative impact for people and economy in the future, but if Republicans are smart enough –and they are- they are going to be able to hide it before the mid-term elections.
The tax deduction will endure forever for richest, and mid class will see how their benefits will be decreasing from 2019 on, to finish paying more that today in 2026. But that is a long time to go in politics. In November 2018 most of the people will have a few cents more in their wallets and it is going to be hard to convince them that the future may not be as brilliant as it is going to look at that time.
The Tax Reform will add more than a trillion dollars to the debt, but those numbers won’t be ready to analyze until early 2019. The only curve of the debt visible next year is going to be the debt of 2017, and that one belongs to Obama, no matter it was expended by Trump.
Another cost of the Tax Reform that poor people is going to pay is the reduction of welfare. The deficit in the budget is going to be softened by cutting funds in the social assistance programs. A few Republicans recognized it already.
Medicaid, Medicare, Unemployment, education programs, housing programs, etc will be affected in future budgets. That is the real challenge of the Republican Party, but they can delay the cuts a few months, so they can reach November without giving bad news to the voters.
Delaying the cuts is going to be catastrophic for the future, but Democrats are not going to be the ones asking for cuts in welfare to protect the national debt. At the end of the road, when we realize the damage, Republicans will be dominating the hill for at least two more years.
The Tax reform also hits Obamacare. By eliminating the “mandate” –a fine that tax payers without insurance had to pay- the government misses part of the money needed to compensate private insurance companies, which will cause more increases in premiums.
Insurance companies had already informed new premiums for 2018 and they will receive the subsidy from the mandate in 2018, so only at the end of next year they will be able to budget premiums of 2019 without the mandate. That is a win-win for Republicans. If insurance companies announce increase of premiums after the elections, everything will remain the same, if the announcement is done before, they will blame Obamacare and will have another argument to push the repeal, if they have not done it before.
For all this reasons Republicans are celebrating and pledging Donald Trump. Democrats think people will punish Republicans, but that can be another political mistake, like the one in 2016.