By Alan Murray and Geoffrey Smith
December 19, 2017

Good morning.

Stock markets around the world continue to celebrate the imminent passage of the tax bill, which is likely to be approved in the House today and in the Senate by mid-week. The bill cuts the corporate tax rate from 35% to 21% percent; trims the top individual rate from 39.6% to 37%; cuts the top tax rate on “pass through” entities from 39.6% to 29.6%; nearly doubles the standard deduction but offsets that by eliminating the personal exemption; expands child credits; trims the state and local tax deduction; and ends the penalty for not buying health insurance.

As a matter of substance, the bill brings needed change to the corporate tax system and provides tax relief over the next decade to most Americans. But it does that at a hefty cost—roughly a trillion dollars added to the budget deficit over the decade. And its benefits tilt toward those at the top of the income scale.

As a matter of politics, the National Review’s Jonah Goldberg correctly calls this the GOP’s Obamacare. Like the Affordable Care Act, it was passed on a purely party-line vote, via a truly ugly process, with little time for legislators to figure out what’s in it. Both were justified more by ideology than analysis, vilified by the opposing party as apocalyptic in consequences, and passed on the assumption that once implemented, they would be very hard to repeal and reverse.

What remains to be seen is if the tax bill will end up being a better bet for Republicans than the health care bill was for Democrats—who lost control of Congress largely as a result. The Democratic fundraising machine is already gearing up to return the favor. Whether the economy continues its growth streak through next year’s election could prove critical. Whether companies use any of their windfall to invest in the U.S., rather than simply fund dividends and share buybacks, could matter as well.

There are a number of reasons why comparisons of this bill to the 1986 tax reform act are faulty. But the most important one is this: the 1986 tax act was passed after a long legislative process by bipartisan majorities in both houses of Congress, and became the law of the land. This bill, like the Affordable Care Act, is destined to become a political football. It may have some beneficial economic effects, but it’s not any way to run a country.

News below.

Alan Murray
@alansmurray
alan.murray@fortune.com

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