Daniel Davis is the commentary editor of The Daily Signal and co-host of The Daily Signal podcast.
President Donald Trump delivered his first State of the Union address on Tuesday night. Experts from The Heritage Foundation weighed in with responses on various policy fronts. Here’s what they had to say.
  • Economy
  • Law
  • Immigration
  • Defense & Foreign Policy
  • Energy & Infrastructure
  • Health Care
  • Education


Tax Reform Is Delivering Results
President Trump is right. The Tax Cuts and Jobs Act is providing tremendous relief for the American people.
Within less than a month of the bill signing, over 260 businesses across all industries announced raises, bonuses, and new investments directly benefiting over 3 million Americans. Next month, almost every American worker will have a larger paycheck thanks to tax reform.
Americans need an alternative to the mainstream media. But this can't be done alone. Find out more >>
Tax reform is expected to result in hundreds of thousands of new jobs and wage increases for American workers of all income levels. Down from 35 percent—one of the highest in the world—the U.S. now has a globally competitive corporate tax rate of 21 percent, which will lead to even more jobs, higher salaries, and increased economic opportunities for Americans for years to come.
However, there is still work to be done. Many of the individual and business tax cuts expire before 2026, providing an opportunity for big government to raise taxes rather than Cut spending. Congress and the president must work to make the tax cuts permanent for American taxpayers.
Most Americans Will Receive a Tax Cut
Most Americans now have lower tax rates, allowing them to save more and invest in their family’s futures. President Trump highlighted a typical family making $75,000. They will see their tax bill cut in half.
To illustrate the size of the tax cuts, meet the Joneses. They have three kids and a mortgage. As a sales rep and a part-time nurse, they currently earn $75,000 a year. Under the new bill, they can keep an extra $2,000 of their hard-earned money to invest in their children’s future.
Their neighbor Tom Wong is a teacher earning $50,000. About 10 percent of that currently goes to taxes, but under the new bill, he can expect a $1,100 savings. More than 80 percent of Americans receive a tax cut.
The Fernandez family, who run a family-owned blinds and shades business, will also get a tax cut. This year, their hard work paid off and their company earned $250,000. Now, they can invest an extra $13,000 in growing their business. They can also raise wages and give out bonuses to their employees instead of handing the money over to the government.
When Washington takes less of the American people’s money, everyone wins.
Small Business Deduction Should Be Replaced With Lower Rates
President Trump highlighted the new 20 percent pass-through business deduction, one of the few parts of the Tax Cuts and Jobs Act that should not be extended.
Small and pass-through businesses that pay their taxes as individuals and face the new lower individual tax rates will receive a newly created deduction.
Although lower marginal tax rates for small and pass-through businesses are an important component of economic growth, the newly created discrepancy in top rates between individual income and small and pass-through business income will increase the incentives to treat income from wages artificially as business income.
This new tax privilege has no consistent policy rationale, arbitrarily favors certain types of businesses over others, introduces new complexity, and will provide new opportunities for unproductive tax planning. When the business deduction expires in 2025, Congress should not extend it and instead focus on further lowering individual tax rates to treat all income sources equally.
– Adam Michel, policy analyst, Thomas A. Roe Institute for Economic Policy Studies
Tangible Effects of the Tax Law
The president talked about how the Tax Cuts and Jobs Act will soon result in higher paychecks for the overwhelming majority of American workers.
In fact, some have already experienced a significant change in their after-tax pay. That is because the Tax Cuts and Jobs Act’s lower rates and a higher child tax credit will provide higher disposable incomes. (See these examples of how the revised tax system will affect different workers’ and retirees’ annual incomes after taxes.)
Simpler Taxes for Individuals
The president emphasized how the Tax Cuts and Jobs Act will help ordinary, working-class Americans. In addition to higher take-home pay, the new tax law will also simplify taxes for tens of millions of Americans.
By replacing some existing deductions and exemptions with a higher standard deduction and lower tax rates, many workers will spend less time keeping track of tax records and filing their tax returns. They may even be able to save the cost of paying an accountant to help with their taxes.
We estimated that the Tax Cuts and Jobs Act will cut the number of taxpayers who itemize by more than half, saving between 21 and 28 million Americans the hassle of keeping track of and itemizing their deductions.
No More Individual Mandate Tax
As the president highlighted, the Tax Cuts and Jobs Act got rid of a tax that fell most heavily on individuals and families making less than $50,000 per year.
Eliminating the Obamacare individual mandate will reduce the tax bills of many individuals and families—based on their own choices—by hundreds, if not thousands, of dollars. And most importantly, it will leave taxpayers freer to make personal decisions absent the heavy hand of Uncle Sam.
Government Reorganization
The president highlighted what his administration has done to “restore the bonds of trust between our citizens and their government.” This includes making the government more efficient and accountable to the American people.
Heritage responded to the president’s executive order to reorganize the federal government by producing two comprehensive reports that include proposals for cross-cutting government reforms, like making federal compensation more competitive with the private sector and reducing red tape; and more than 100 individual proposals to cut waste, duplication, inefficiencies, and unnecessary federal functions.
Many of those Heritage proposals are now part of the administration’s plans and some have already been implemented.
Reforming the Federal Workforce
Congress should respond to the president’s call to “to empower every Cabinet secretary with the authority to reward good workers—and to remove federal employees who undermine the public trust or fail the American people.”
Removing a federal employee should not be tantamount to a criminal prosecution and take well over a year to complete. In addition to making it less burdensome to remove federal employees, The Heritage Foundation proposes a comprehensive set of federal compensation reforms that would make the federal government more competitive and result in over $300 billion in taxpayer savings over a decade.
– Rachel Greszler, research fellow in economics, budget, and entitlements, Institute for Economic Freedom and Opportunity
Eliminating State and Local Deductions
One important component of the president’s tax reform was the (partial) removal of state and local tax deductions.
Heritage research has found that state and local deductions contribute to enormous distortions in the tax code, unjustly benefit high-income taxpayers in high-tax states, and incentivize states to raise taxes. These deductions, coupled with the municipal bond interest deduction, account for an estimated $1.7 trillion in revenues over the next 10 years.
Even partial removal of these deductions not only provides justification for significant rate cuts that will boost economic growth, but also removes incentives for states to unnecessarily raise taxes.
– Kevin Dayaratna, senior statistician and research programmer, Institute for Economic Freedom and Opportunity
– Rachel Greszler, research fellow in economics, budget, and entitlements, Institute for Economic Freedom and Opportunity
Sizing Down the Administrative State
On Tuesday, President Trump said that his administration has eliminated more regulations during its first year in office than any prior administration in American history.
A longstanding criticism of the administrative state has been that it imposes unduly burdensome costs on the American economy through the issuance of a blizzard of unnecessary rules that stifle investment and reduce employment.
In 2015 alone, the Obama administration imposed more than $22 billion in annual costs on the nation. During the presidential campaign and first year of his administration, President Trump made clear that he intends to address that problem. In fact, he and senior members of his administration have vowed to remake the administrative state as we currently know it.
The president has tried to carry out that reform in two ways.
First, he appointed Mick Mulvaney to head the Office of Management and Budget, and Neomi Rao to head the Office of Information and Regulatory Affairs. Together, they see their mission as implementing the president’s goal of eliminating unnecessary regulations.
Second, President Trump has issued a series of executive orders directing senior agency officials to aggressively review the effects that excessive federal agency regulations have had on economic growth, to eliminate unnecessary rules, to ensure that agencies do not act in an ultra vires manner, to respect the values of federalism, and to always measure and be guided by the costs and benefits of any rules an agency considers.
Third, as an additional step in his regulatory reform program, President Trump signed 15 congressional joint resolutions passed under the Congressional Review Act of 1996. Those joint resolutions nullified agency rules promulgated during the last year of former President Barack Obama’s administration or, in one case, in 2017 by the Consumer Financial Protection Bureau.
– Paul Larkin, senior legal research fellow, Meese Center for Legal and Judicial Studies, Institute for Constitutional Government
Inconsistent on Trade
The first year of the Trump administration has seen more movement toward economic freedom than most proponents of limited-government, pro-growth policies had hoped for. However, the trade policy and rhetoric of the past year runs counter to these job-creating trends.