The Republican Tax Bill Doesnt Actually Simplify The Tax Code
H&R Block’s shareholders endured a rough patch in early November, and the initial draft of the GOP’s tax overhaul appears to be at least partly to blame.
On Nov. 2, Rep. Kevin Brady, the chairman of the House Ways and Means Committee, and Speaker Paul Ryan unveiled the original version of the House bill, kicking off nearly two months of frenzied congressional dealmaking that resulted in a measure making its way to President Trump’s desk. Their initial pitch included a promise that 9 in 10 Americans would be able to file their taxes on a postcard, in part because a higher standard deduction would offset the incentive to maximize the tax code’s myriad benefits and loopholes. To emphasize the point, the pair brought a prop to their announcement that read, “Simple, Fair ‘Postcard’ Tax Filing.”
On the surface, that looked bad for H&R Block. The company, which processed 19.7 million American tax returns in 2016, exists because so many Americans would rather pay someone to do their taxes than perform all those calculations themselves. If filing were to become as easy as writing a postcard, then H&R Block stood to lose business. As Trump said when he met with Brady and Ryan: “The only people that aren’t going to like this is H&R Block. They’re not going to be very happy. That’s probably one of the only companies in the country that’s not going to be thrilled.” The firm’s stock price dropped 2.6 percent that day to $23.86, the lowest since April 24.
Shareholders shouldn’t have panicked. H&R Block’s stock price has gained 14 percent since Nov. 2, as it became clear that postcard filing was more gimmick than revolution. The vast majority of American families already take the standard deduction, and many of those that do still feel they need help with their taxes. So the ability to file “on a single, little, beautiful sheet of paper,” as President Trump put it in a televised address on Dec. 13, never was going to dramatically change the lives of American taxpayers on its own. That would have required pairing a simple filing system with fewer credits, deductions and gimmicks. Instead of using a rare political opportunity to reform the tax code, Republicans chose to slash the corporate tax rate. Most of the loopholes remain in place.
https://fivethirtyeight.com/features/the-republican-tax-bill-doesnt-actually-simplify-the-tax-code/
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