The Senate Finance Committee late Thursday approved the Senate’s version of the GOP’s “tax cuts for corporations and Plutocrats” bill, after the House passed its version earlier in the day. Senate panel approves GOP tax plan. The panel voted to send the tax plan to the full Senate on a party-line vote of 14-12.
The Septuagenarian Ninja Turtle, Senate Majority Leader Mitch McConnell, said in a statement “When the Senate returns after Thanksgiving, I will bring this must-pass legislation to the floor for further debate and open consideration.”
Well, this is going to make for some heated discussions at Thanksgiving dinner when your drunk uncle shows up wearing his MAGA hat and Trump T-shirt. Here’s some information that you can use to try to properly educate your ignorant drunk uncle.
Paul Waldman of the Washington Post explains, The GOP tax plan is moving forward. It’s a big scam on Trump’s base.
Today the House [passed] its version of a tax reform bill, and if and when the Senate passes its version, the two will be combined in a final bill that will most likely wind up becoming law. We already knew that the House version would raise taxes on tens of millions of Americans — about 36 million, according to figures from the Joint Committee on Taxation, whose job it is to analyze tax bills before they’re voted on. Now we’re learning more about the Senate version:
The tax bill Senate Republicans are championing would give large tax cuts to millionaires while raising taxes on American families earning $10,000 to $75,000 over the next decade, according to an analysis released Thursday by the Joint Committee on Taxation, Congress’ official nonpartisan analysts.
President Trump and Republican lawmakers have been heralding their bill as a win for hard-working Americans, but the JCT report casts serious doubt on that claim. Tax hikes for households earning $10,000 to $30,000 would start in 2021 and grow sharply from there. By the year 2027, Americans earning $30,000 to $75,000 a year would also be forced to pay more in taxes even though people earning over $100,000 continue to get substantial tax cuts.
Everyone always knew Republicans were going to cut taxes for the wealthy. They’re Republicans; that’s what they do. But it’s a genuine surprise to see them raising taxes on people with more modest incomes. Why isn’t this being angrily decried by all those conservatives who believe that tax increases are a crime against humanity? Could it possibly be that they don’t really care about the middle class as much as they say? Was the whole point of this exercise to cut taxes on corporations and the wealthy, and if regular people have to pay more so those at the top can pay less, then that’s fine with them? Say it isn’t so!
Now keep in mind, these numbers are averages, which means that on average, those earning less than $75,000 will see their taxes go up. Since both bills are such complex hodgepodges of provisions, whether you in particular will see your taxes go up or down depends on your particular situation. That’s one of the reasons you should be on your guard when people like House Speaker Paul Ryan start talking about how great a “typical family” will make out; chances are their numbers rest on questionable assumptions to start with, and only apply to some lucky people.
While this JCT document doesn’t say exactly how many people will see their taxes rise, other analyses give us a hint. For instance, the Institute on Taxation and Economic Policy estimates that under the Senate plan, 19 million households will see a tax increase in 2019, and more than 23 million will get a tax hike by 2027.
The numbers of people getting a tax hike under the House bill are even higher, because it’s more aggressive about eliminating deductions. But the Senate bill also eliminates the Affordable Care Act’s individual mandate, which Republicans will almost certainly include in the final bill, because they need the savings it creates in order to pay for the corporate rate cut.
Who will be hurt most by the elimination of the mandate? The Congressional Budget Office estimates that there will be 13 million fewer Americans with health insurance, and an increase in premiums of 10 percent per year on the individual market over what would have happened without this change. The people hit the hardest will be those who don’t realize they can still get free Medicaid or low-cost coverage with subsidies (and end up uninsured as a result), and those whose incomes are just too high to qualify for subsidies. Those in the latter category are the middle class and upper-middle class.
And just look at the deductions that might be eliminated, depending on how the final bill comes out. Deductions for things such as medical expenses, and state and local taxes, and student loan interest, and grad school scholarships. [see: Government analysis shows House tax bill would increase the cost of college by $71 billion over a decade.] There are certainly wealthy people who use those deductions, but the people they really matter to are those in the middle class.
Update: Thinking of buying a house? The Wall Street Journal reports the tax bills working their way through Congress could slash production of affordable housing across the U.S. at a time when supply is near historic lows (Freddie Mac), industry executives warn. Affordable-Housing Production Under Threat in Tax Overhaul Proposals (pay wall article). Your drunk uncle is going to be living with you.
Keep this in mind, too: The way the Senate bill makes its numbers add up is by letting many of the cuts disappear in 2025. But you know what doesn’t disappear? The corporate rate cut. That’s permanent. CEOs aren’t even bothering to pretend that they’ll take the tax windfall they get and use it to raise wages: After all, they’re already making near-record profits, so it’s not as though they’re just waiting for a cash infusion to bestow their largesse on the working man. No, the corporate cut is going to go right back to the wealthy, in the form of stock buybacks and dividends.
Finally, it’s important to understand that the tax cut is just one phase of a larger project Republicans have been dreaming of for years. Once this bill passes, they’ll say that we face enormous deficits (made far worse by their tax cut, of course), and therefore we have no choice but to slash away at the safety net. As John Harwood points out today, they’re already preparing to take aim at programs such as Medicaid and Social Security disability, whose largest group of recipients are working-class whites. Trump’s core supporters are about to be handed the bill for tax reform.
To be sure, Trump’s most ardent supporters won’t care. As my friend Thomas Schaller, the political scientist, often observes, for many Trump voters, the election victory was itself the most important deliverable, the proof that their voices had been heard — not to mention a triumphal punch in the face to foreigners and minorities and political correctness. They’re less concerned about what happens afterward, which gives Trump and congressional Republicans the ability to take their money and give it to those who need it least.
That’s the thing about a con. It works best when the marks are only too happy to let you con them.
More on the “next step” or “phase two” of the evil GOP bastards plans if the tax cut bill is enacted from economic policy adviser to President Ronald Reagan, Bruce Bartlett. First, Republicans want tax cuts. Next, they’ll try gutting Medicare and Social Security.
President Trump and congressional Republicans want Americans to think that their proposed tax legislation is all about increasing economic growth.
That’s their stated goal. But the stealth goal of GOP tax cuts is to start down the path toward gutting the New Deal and the Great Society — and if tax cuts pass, they might get away with it.
As I wrote in September for The Washington Post, “there’s no evidence that a tax cut now would spur growth.” Yet leaders such as House Speaker Paul D. Ryan still maintain the fantasy that their brew of income and corporate tax cuts will mean “faster economic growth” and “better jobs being created.” It’s an idea belied by Trump’s own tweets, in which he routinely extols the economy:
He’s not wrong. But with near-full employment and a roaring stock market, you don’t cut taxes.
When past presidents — John F. Kennedy, Ronald Reagan, George W. Bush — proposed tax cuts on the order Trump now proposes, it was always when the economy had considerable slack: underutilized resources such as unemployed workers and idle factories. In each case, according to the National Bureau of Economic Research, we were either in a recession or just past one. At times of economic slack, there can be a lot of bang-for-the-buck from a well-timed and well-targeted stimulus program. Indeed, when the stimulus takes the form of public works that will pay dividends for decades, it gives the economy a double benefit, putting unemployed workers to work at a time when wages, raw materials and interest rates are low. It’s like buying something you need when it’s on sale.
If anything, by enacting a stimulus now, in the form of a tax cut, when the economy is near full employment, the government risks raising inflation, which would mean the stimulus generates higher prices rather than reduced unemployment — when employers can’t find additional workers to meet increased demand, they have little choice but to bid up wages, which get incorporated into prices.
So, why do it? Because for decades, conservative intellectuals have pushed for big tax cuts; less to grow the economy and more because they want to “starve the beast.” They want to force a major overall spending cut that would be a political non-starter without first passing a tax cut that creates a deficit so large, something must be done about it. [purposeful economic sabotage.] Spending cuts must be enacted, then, as they would be presented as the only way to pay for the already passed tax cut’s lost revenue.
Americans for Tax Reform, for instance, led by starve-the-beast enforcer Grover Norquist, is quite open about its goals. The organization’s infamous tax pledge attempts to ensure that budget deficits can never be reduced with higher taxes, only spending cuts. Other fiscal responsibility groups are passive allies. They care about deficits but tend to be far more concerned about slashing entitlement programs such as Social Security and Medicare than they are about opposing tax cuts. In practice, they ally with starve-the-beast advocates.
These days, if tax cut hawks nod at all to cutting deficits, it’s with the false promise that tax cuts bring more growth, even at lower rates, and thus more revenue available for deficit reduction [the faith-based supply side “trickle down” tax myth]. As Freedom Caucus leader, Rep. Mark Meadows (R-N.C.), told Politico, “What you have to do is you have to mitigate the damage by being as aggressive as you can be on tax rates, which would lessen the damage of our lack of fiscal responsibility over time.” Good luck with that, congressman.
The stage is being set for an all-out attack on the welfare state the minute a tax cut is signed into law. Per an analysis by the Committee for a Responsible Federal Budget, the Republican budget already assumes $4 trillion in cuts to mandatory spending over 10 years, a euphemism for Social Security and Medicare. But no action has yet been taken to implement the spending cuts.
Indeed, as The Post reported Tuesday, Republicans just added repeal of Obamacare’s individual mandate to their tax package to “free up more than $300 billion in government funding over the next decade that Republicans could use to finance their proposed tax cuts.” As The Post also reported, the Congressional Budget Office has warned that the tax cut would “add $1.5 trillion to the debt over the next decade,” potentially leading to an automatic cut of $25 billion to Medicare in 2018 because of a law known as paygo (pay-as-you-go) designed to prevent higher deficits.
Republicans might find a way around paygo, but it’s a safe bet that once the tax cut is out of the way, Trump’s Office of Management and Budget will begin issuing warnings about rising deficits, financial collapse and hyperinflation unless immediate action is taken to reign them in.
Which, in turn, may create a bandwagon effect that overwhelms opposition. That’s what happened recently in Kansas, where the GOP hurt revenue by misleading Kansans about tax cuts’ stimulative impact to get them passed. Right-wing economist and consultant Arthur Laffer, hired by Gov. Sam Brownback, portrayed the effect of tax cuts as if increased revenue from growth would take care of budget shortfalls — the same thing that Treasury Secretary Steven Mnuchin predicts from the Trump tax proposal when he claims, “The tax plan will pay for itself with economic growth.”
An aside: ‘Like Bond villains’: What happened when Steven Mnuchin and his wife posed with a sheet of money. Talk about being out of touch.
In Kansas, when revenue collapsed, Republicans didn’t respond by admitting error and restore the taxes that had been cut. They “slashed university budgets, canceled highway projects and convinced reluctant lawmakers to go along with a plan to borrow $1 billion to shore up the state’s public pension fund.” Eventually, facing continued shortfalls, Republicans voted to raise the sales tax and a tax on cigarettes which disproportionately hit the pockets of poor and working-class Kansans who had received virtually no tax cut at all. Only when spending had been slashed and regressive taxes raised did Republicans finally restore some of the taxes that had been cut.
By framing their opposition to Trump’s tax plan as a worry that it does too little for the middle class, as they’ve done so far, congressional Democrats risk playing into the Republican playbook by agreeing in principle to the virtue of tax cuts.
I’ve yet to hear a Democrat say that no tax cut is either necessary or justified by current economic conditions. While it is true that the middle class is suffering, it’s not from high income taxes, which are at a historically low level. According to the Tax Policy Center, a family with the median income pays an income tax rate of just 5.34 percent, less than half what it paid during the Reagan administration, even after the 1981 tax cut.
Trump’s top economic adviser, former Goldman Sachs executive Gary Cohn, says the benefits of the tax cut will trickle down to the middle class, an absurd suggestion. The rich aren’t going to buy second and third yachts just because they got a tax cut. And the idea that a tax cut for big corporations will raise wages is nonsense. Just this week, chief executives balked when Cohn tried to get them to agree that they’d invest in hiring if a tax cut passed. Wages fell steadily after the corporate tax rate was cut to 34 percent from 46 percent in 1986. They also fell in Britain when it cut the corporate tax. The tax savings will primarily go to corporate executives and shareholders.
Democrats should oppose any tax cut. And of course they should oppose slashing Social Security and Medicare — by making these programs less attractive, it aids in their gradual abolition through privatization, another goal of the GOP. They may not have much leverage in the tax debate, but they should try to force Republicans to put on the table details about the spending cuts that their tax cut is designed to bring about.
If they’re worried about political cover, they shouldn’t be: A Quinnipiac Poll released Wednesday shows that by a 2-1 margin, Americans oppose Republicans’ current plan.
Once we can see the whole picture, Americans will have a clearer idea of the net benefit to them. The rich don’t need either Social Security or Medicare — it’s the middle class, which depends on both, that needs to know how tax cuts and spending cuts affect them. If Social Security and Medicare cuts follow tax cuts, on net, even those who would get a tiny tax cut will be much worse off when the spending cuts are factored in. This will give a true, complete picture of the distribution of pain and gain in the GOP program.
Republicans have played this game before — luring Americans toward government downsizing with the promise of tax cuts. The best way to avoid getting played again is not to play the game.