You may have missed this over your Thanksgiving holiday, but Greg Sargent of the Washington Post has an important analysis about the GOP’s regressive tax bill. The Trump tax plan is much worse than you thought. A new analysis confirms it.:
The fate of the Senate GOP tax plan now rests in the hands of a few undecided Republican senators, and next week, they will make up their minds. But a new nonpartisan analysis of the plan will make it much, much harder for them to embrace it — or at least it should, if their stated principles mean anything at all.
Here is the key takeaway from the new analysis, which is the work of the Tax Policy Center: By 2027, around 50 percent of taxpayers will see a tax hike. The whole purpose of this tax increase is to make it possible for Senate Republicans to pass a tax cut that overwhelmingly benefits the very wealthiest taxpayers — on party lines, without any Democrats.
Using the data from the TPC’s analysis, I’ve created two charts that boil down the story of the Senate tax bill. The first chart details the average tax change for each major income group, by year, if the Senate plan becomes law, in dollars:
This shows that in certain respects, the plan actually gets more regressive over time. The tax cuts for the four lower-income quintiles basically shrivel up and disappear by 2027, with the two lowest quintiles ultimately seeing either a tax hike or no change, while the middle and fourth see the tax cut dwindle away to almost nothing. By contrast, in 2027, the top one percent sees an average tax cut of more than $30,000, and the top 0.1 percent sees an average tax cut of more than $200,000 — more than double what it was in 2019, and a good deal more than it was in 2025.
Why does this happen? Because the Senate plan front-loads the benefits for lower- and middle-income groups. It cuts individual income taxes for all groups and gives lower-income groups various tax preferences, but those things are temporary, and expire after 2025. But three things remain permanent: The individual mandate repeal; a new inflation metric that continues pushing people into higher tax brackets; and the corporate tax rate remains at 20 percent, down from 35 percent.
Because of all these complexities, some people in every income group see a tax hike at each juncture, and some people in every one of them see a tax cut. That’s all reflected in the averages in the chart above, which in the short term tilt toward a cut for all groups. But come 2027, most of the benefits for lower- and middle-income taxpayers vanish, even as the corporate tax cuts continue delivering a massive reduction to the top:
This, too, shows that the plan gets more regressive over time. Large majorities of the middle three quintiles see tax hikes in 2027. Meanwhile, virtually all the people in the top 1 percent and top 0.1 percent see a tax cut. Taken all together, 50 percent of overall taxpaying units see a tax hike; the vast majority of those people are concentrated in the lower quintiles.
Joseph Rosenberg, a senior research associate at TPC, told me that the TPC’s model explains these findings. The TPC’s model assumes that broadly speaking, 80 percent of the benefits of corporate tax cuts go to shareholders and capital, and 20 percent go to labor. That 20 percent figure is why smaller groups of people of more modest incomes continue to get a tax cut in 2027 (the larger numbers who see a tax hike do so because the change in inflation indexing pushes them into higher tax brackets). And it’s also why almost everyone at the very top continues to get a tax cut — a massive one.
“By 2027, all that’s really left is a big corporate tax cut,” Rosenberg told me. “This primarily benefits high-income people — people with a lot of capital income — shareholders, people who have capital gains dividends, and people who have interest income.”
The whole point of the bill
The whole point of zeroing out the tax cuts for lower-income groups, resulting in a tax hike for so many people, is to fund the continued corporate tax cuts, so they don’t add to the deficit in the long run, allowing Republicans to pass the bill via a simple majority vote. Republicans insist that the lower-end tax cuts will be extended later. But this should drive away deficit hawk Republicans such as Jeff Flake, Bob Corker and John McCain, since it amounts to an admission that either taxes will go up on the middle class or the deficit will be blown up later. By the way, another TPC analysis of the House plan finds that the tax cuts won’t produce the necessary explosion of growth to pay for them, so that rationale is also out the window.
By the numbers: It would boost economic output by only 0.6% of GDP in 2018, 0.3% in 2027 and 0.2% in 2037. It would increase debt as a share of GDP by 5% in 2027 and by 9% in 2037.
Meanwhile, Susan Collins (R-Maine) has come out against the bill’s mandate repeal on the grounds that spiking premiums would cancel out the tax cuts for many lower-income people. But the bill actually hikes taxes for enormous numbers of those same people. How can any of these senators support this bill, given what we know about it now, without rendering their previously stated principles totally hollow?
Looking at you Sens. McCain and Flake. As Frank Bruni of the New York Times recently wrote, Jeff Flake Spoke Up. Time to Put Up.:
It was just a month ago this Friday that Senator Jeff Flake, the Arizona Republican, rose in the Senate to insist that we “must never adjust to the present coarseness of our national dialogue,” laying a hefty share of the blame for it on “the tone set up at the top.”
He used those remarks to condemn President Trump for “the daily sundering of our country.” He lashed out at the president’s “flagrant disregard for truth and decency” and uttered the syllables “enough.”
It was some speech. And if he follows it by handing Trump a victory on tax reform, it was merely that: words. Pretty, yes. But pointless in the end.
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I’ll make it up for him: If he stands by that stirring Senate soliloquy and truly regards Trump as “dangerous to a democracy,” then this is much more than a vote about government revenue. It’s a choice between propping up and enfeebling an undeserving, unprincipled and frequently unhinged president who desperately needs a legislative triumph to hold on to his relevance and his best shot at a second term. Flake can lower corporate taxes or hobble Trump. In the grand scheme of things — in the scheme that he himself so eloquently laid out — there’s no contest between those concerns.
That would be true even if this were a piece of legislation in line with the conservative fiscal principles that Flake and many of his fellow Republicans in the Senate espouse. It’s not.
The last-minute addition of a repeal of Obamacare’s individual mandate and thevarious accounting gimmicks built into the bill aren’t there so that tax reform doesn’t add to deficits. They’re there so that it doesn’t add to deficits by more than $1.5 trillion over 10 years. You can’t support this legislation and call yourself a deficit hawk. More like a deficit ostrich.
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That same question goes to John McCain, to Susan Collins and to other Senate Republicans who have indicated grave apprehensions about Trump. Their party’s donors may be demanding tax reform. They themselves may believe in some of the bill’s particulars. But do they believe in this president? In where he has tugged the G.O.P.? Do they want to aid him, or put him behind them as quickly as possible?
Some Republicans beyond Trump would be hurt by a defeat on tax reform. But they’d be hurt more in the long run by sustained surrender to him. To crib a phrase from Flake, they’d be toast.
In his book “Conscience of a Conservative,” which was published in August and was the prelude to his big speech, Flake wrote that Republicans indulged Trump by rationalizing that he might help them “achieve some long-held policy goals.” But Flake added that if this “put at risk our institutions and our values,” it raised the question of “whether any such policy victories wouldn’t be Pyrrhic ones.”
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Flake’s message a month ago had a more elevated vocabulary but the same urgency. He said that lawmakers must be “unafraid to stand up and speak out as if our country depends on it, because it does.” Was that preening or patriotism? He can show us with a single vote.
Call your senators today and demand that they vote against this terrible GOP tax bill. Put country before party and ideology.