The GOP’s Failed Tax Bill

A Tax Code Turned Turkish Bazaar

Last week, the House of Representatives rightfully rejected a Republican tax bill marketed as middle-class relief but riddled with economic distortions, fiscal recklessness, and political pandering. Far from the principled reform the GOP once championed, this bill resembled a Democrat-style spending spree dressed up as tax policy—a chaotic patchwork of carve-outs, stealth tax hikes, and gimmickst hat should have never seen the light of day.

Let’s start with the core problem: this proposal violated every pillar of sound tax policy—simplicity, stability, neutrality, and transparency—while abandoning the economic growth agenda that true tax reform should advance.

A Tax Code Hijacked for Political Favoritism

Rather than fostering growth, the bill weaponized the tax code for redistribution and special-interest cronyism. It offered exemptions for tips and overtime pay, but only for workers earning under $160,000. This arbitrary cap invites confusion, gaming, and lobbying frenzies. Worse, the tip exemption applies only to jobs “traditionally and customarily tipped” before December 31, 2024—a vague standard that hands the Treasury Secretary unchecked power to pick winners and losers. This is not tax reform. It is tax policy as political payola — a race to see who can shout the loudest in K Street’s lobbying halls.

Another distortion: a deduction for auto loan interest, essentially a subsidy for the car industry. This handout does nothing to boost savings, investment, or productivity—the engines of economic growth—but instead fuels debt-driven consumption while offsetting the cost of misguided auto tariffs that shouldn’t exist in the first place.

Stealth Tax Hikes That Punish Success

The bill’s flaws deepen with its treatment of high earners. By capping itemized deductions for those in the 37% bracket—starting at $626,350 for singles and $751,600 for couples—it resurrects the discredited Pease limitation, wisely undone by the 2017 Tax Cuts and Jobs Act. That reform traded lower rates for fewer deductions, a fair bargain. This bill, however, keeps deductions for some while hiking effective rates for others, flouting transparency and neutrality.

Similarly, lifting the SALT deduction cap from $10,000 to $30,000 for couples—a rollback of another 2017 win—comes with a catch: partial clawbacks for earners above $400,000. This creates a convoluted rate cliff, distorting incentives and sowing confusion. Such bracket tinkering renders the tax code unstable and opaque, punishing success under the guise of “helping families.”

Deficit Deception and Entitlement Creep

How does the bill cover its costs? It doesn’t. Most provisions sunset in 2028, a cynical ploy to hide their true fiscal impact. Republicans once rightly lambasted Democrats for using phase-outs in the Build Back Better Act to mask entitlement bloat. Now, they’ve adopted the same sleight of hand.

The “MAGA account” —a $1,000 government payment for babies born before 2029—is a populist gimmick primed for expansion by future Democratic administrations. Likewise, the proposed child tax credit hike further transforms a once-targeted incentive into a sprawling income transfer, doing little to encourage work or savings. These measures aren’t tax cuts; they’re entitlement wolves in reformist sheep’s clothing.

A Fiscal and Intellectual Surrender

This bill is no tax policy—it’s a spending bill in disguise, using the tax code to redistribute wealth rather than unleash growth. Instead of broadening the base and lowering rates, it narrows the base, favors select groups, and sneaks in marginal rate hikes, all while widening the deficit. The Congressional Budget Office estimated that similar provisions could add $1 trillion to the debt over a decade, a burden the bill’s temporary sunsets only obscure.

Sound tax policy promotes growth, rewards effort, and respects fiscal discipline. This proposal fails on every count. Its rejection by the House spared the GOP—and the nation—from a grave misstep.

Let this be a lesson: true reform demands rigor, not political expediency. Turning the tax code into a Turkish bazaar of favors and gimmicks is no path to prosperity.