After months of negotiating amongst themselves in secret behind closed doors — no Democrats allowed! — with no committee hearings to hear from stakeholder groups and tax experts, and no plans to do so before mark up and proceeding to a rapid vote, the GOP finally released its long anticipated “tax reform” (sic) bill this week.
Dylan Matthews at Vox.com says I’ve spent months covering Republican tax policy. This bill is way worse than I expected. OK then … Matthews follows up with his detailed analysis in The House Republican tax bill, explained (an easy to understand read).
Los Angeles Times business columnist Michael Hiltzik writes, The GOP tax plan is filled with petty cruelties aimed at the vulnerable and the middle class. Here’s a list:
House Republicans’ determination to slash tax deductions for taxpayers and homebuyers in blue states has commanded most of the public’s attention since the unveiling of the GOP’s tax bill Thursday.
The Republicans are crowing that their measure will drastically remake the tax code to spur economic growth while giving virtually all American families a tax cut. But the bill bristles with tax increases aimed at low- and moderate-income households — small in their aggregate effect but burdensome on the targeted taxpayers — that have no apparent social rationale.
Not all these petty cruelties are easily discernible in the shadowy corners of the 429-page bill. Some are buried so deep that it will take a platoon of coal miners to bring them to the surface. But others are more thinly disguised. Here’s a sampling, listed by general category.
Continue reading Hiltzik’s piece.
Tax expert David Cay Johnston reports at DCReport.org, Republicans Declare War On Entrepreneurs And Small-Business Owners:
The GOP just declared war on the strivers who start their own businesses.
Or, to put it another way: The nice young couple who just opened their own independent coffee shop around the corner will likely be hit with a huge tax increase—as much as 250%—while the corporation that operates thousands of coffee shops all around the world is getting its taxes cut 43%.
The complicated new bill—remember when the GOP promised tax simplicity?—also lavishes federal tax favors on rich individuals and on those who live in low tax states.
No wonder the GOP developed the nearly 500-page tax bill in secret. Had the public’s business been conducted in public, this bill simply would not exist.
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The [GOP] used to promote tax favors for those who start new enterprises.
But now that Trump has turned Washington into a federally protected wetland for big, established business and comfortable billionaires, stocking the swamp with the most voracious predators on Wall Street. The GOP bill shows how it is on the side of Wall Street, at the expense of Main Street.
The tax plan would dramatically raise taxes on many entrepreneurs, in some cases more than doubling the tax rate they pay on their profits. That explains why groups like the National Federation of Independent Business attacked the bill, saying in a statement that the bill “does not help most small businesses.”
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Raising taxes on the smallest businesses while giving the Big Boys a tax rate cut from 35% to 20% only makes sense if you negotiate in secret and you only allow into the room lobbyists hired by those who can afford to buy high-priced influence peddlers.
Jim Tankersley at the New York Times analyzes, ‘Major, Major’ Tax Cut May Not Be in Store for Middle Class:
The House Republican tax bill is a clear windfall for corporate America and a roll of the dice for the middle-class families that President Trump promised would be the centerpiece of his economic agenda.
Early projections suggest the bill would cut taxes for an average middle-class family. But the typical cut could be relatively modest, compared with the benefits for businesses and high earners. More important, the myriad changes in the code would actually raise taxes on nearly 13 million tax filers who earn $100,000 a year or less, according to preliminary calculations using the open-source economic modeling software TaxBrain.
Those changes also include limits on, or the elimination of, what might be called tax breaks for middle-class aspirers. The bill would no longer allow Americans to deduct interest on student loans they took out to attend college. It would limit mortgage interest deductions to $500,000 on newly purchased homes, a provision that would hit middle-class teachers or office workers looking to buy starter houses in high-priced, economically vibrant areas such as New York City and Silicon Valley.
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It is difficult to see those provisions as the unambiguous gift to American workers — the “major, major tax cut,” in the words of Mr. Trump — that Republicans promised. Instead, the bill effectively asks those workers to put their faith in a sort of bank-shot theory of income growth, where corporate tax cuts turn into profits that are passed on to workers in the form of higher wages.
If those benefits do not accrue, many workers could face higher taxes while companies keep their savings or pass them on to shareholders in the form of higher dividends.
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The Republican architects of the bill headlined their sales pitch by saying the plan would deliver a tax break of $1,182 a year to a typical family of four earning $59,000 a year.
[But] for those families, the potential benefits are complicated. Calculations by David Kamin, a former Obama administration official who now works on tax issues at New York University’s law school, suggest that the family cited by Mr. Ryan would see its tax cut evaporate over a decade, because of the expiring tax credit (assuming it is not extended) and a change in inflation indexing. By 2024, Mr. Kamin estimates, the family’s tax bill would be higher than it would have been under the current law.
Continue reading Tankersley’s analysis.
Patricia Cohen adds at the Times, A Tax Cut That Lifts the Economy? Opinions Are Split:
Economists are still parsing the details, but even some ardent supporters of the plan say expectations about heady growth and job gains are exaggerated. Interest rates are already at bargain-basement levels, plenty of potential investment capital is sloshing around, and the official jobless rate is at lows not seen in many years. Moreover, the cost of the tax package will inevitably deepen the deficit and lead to spending cuts that are likely to hit low- and middle-income workers.
“It’s hard to see the stimulative benefit on the economy,” said Lawrence H. Summers, a Treasury secretary under President Bill Clinton. “Most of the benefits as best I can tell will go to wealthy people. The idea that you’re going to get a huge spur to growth is delusional.”
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Critics worry that the focus on corporate competitiveness gives other goals short shrift.
“The corporate rate cuts are a windfall immediately for stockholders, and not workers,” said Steven M. Rosenthal, a tax lawyer and senior fellow at the Urban-Brookings Tax Policy Center. And because 35 percent of United States stocks are foreign-owned, he calculated that $70 billion a year of the tax benefits would go to people in other countries.
As for working people, he labeled the supposed benefits a “sideshow” because they come so far down the road and are so speculative.
Heather Long writes at the Washington Post, GOP vision for taxes: Many people paying more so corporations can start paying less (online caption):
At heart, the GOP plan cuts taxes on large businesses and pays for those reductions by raising taxes on individuals, the exact opposite of what was done in the 1986 Tax Reform Act under President Ronald Reagan. Republicans have long held up the 1986 effort — which did not add to the deficit — as a model.
Congress’s Joint Committee on Taxation estimated Thursday that the tax plan would be paid for by $1.5 trillion in additional borrowing over the next decade. Much of that reflects tax reductions benefiting the wealthy and companies.
The cut in corporate taxes will deplete the Treasury by nearly $847 billion over the next decade, according to the Joint Committee on Taxation. The elimination of the estate tax — which is paid only by the small portion of Americans with estates worth more than $5.49 million — and related measures will cost $172 billion. The creation of a 25 percent rate for people who pay corporate taxes through the individual code — a popular way for the wealthy to reduce their tax obligation — will cost $448 billion.
The GOP offsets some of those costs by raising taxes on individual earners who use tax breaks such as the mortgage interest deduction and the state and local tax deduction. But critics say the GOP could have chosen to overhaul the tax code in a way that concentrated benefits on middle- and working-class Americans — and chose not to.
Economist Paul Krugman of the Times commnents, Donald Trump, Paul Ryan and the Con Man Caucus (excerpts):
On Thursday, House Republicans unveiled a tax “reform” bill with the same good order and careful deliberation with which they unveiled their various attempts to repeal Obamacare. That is, after having had years to prepare, the G.O.P. waited until the last minute to throw something together, without any hearings or serious analysis.
Budget wonks are frantically going through the legislative language, trying to figure out what it means and what it would do — but they can take some comfort in the fact that the bill’s authors are almost equally in the dark.
O.K., some things are clear: The bill would give huge tax breaks to corporations and the wealthy, especially wealthy heirs, while opening vast new opportunities for tax avoidance. You won’t go far wrong if you think of the big tax cuts in the law as having been custom designed to benefit the Trump family.
But these big tax cuts would blow a multitrillion-dollar hole in the budget, so Republicans have been scrambling to find “pay-fors” that limit the addition to the deficit. What they came up with was a hodgepodge of stuff: ending deductions for some state and local taxes, limiting deductions for mortgage interest, phasing out child tax credits, and so on.
Since the point of these measures is to offset tax cuts for the rich, they will, more or less by definition, end up raising taxes on large numbers of middle-class families.
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[R]ight now tax cuts are looking like health care redux: With many years to prepare, Republicans turn out to be completely unready for prime time.
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And why should tax cuts even be on the table? We have budget deficits, not surpluses, and lots of unmet needs for future spending. U.S. taxes are low, not high, compared with other wealthy countries. Predictions that tax cuts will lead to rapid economic growth have been wrong time and again. And by large margins, voters want taxes on corporations and the wealthy to go up, not down.
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However the politics turn out, this is remarkably terrible policy, devised via a remarkably terrible process. Most Americans realize that Donald Trump is a very bad president; they need to realize that his party’s congressional leadership is pretty awful, too.
The New York Times editorializes that the GOP tax bill is A Tax Plan for a New Gilded Age.
The Washington Post editorializes, Republicans break their promise on tax reform.
The LA Times editorializes the House Republicans unveil the wrong tax overhaul.
As the Times‘ David Leonhardt opines, The Tax Bill Deserves to Die:
This is a hastily compiled bill — lacking the thoughtfulness of the Reagan tax reform, for example — and its main purpose is to benefit the wealthy. It would harm many middle-class and low-income families in the short term and the vast majority of families in the long term. Don’t be fooled by anyone who emphasizes the bill’s modest middle-class benefits in its early years. (I explained the bait-and-switch in my column last week.
The next few weeks will be important. Republican leaders have signaled that they will try to rush through a bill. They know it is already unpopular — as many polls, including a new one this morning from ABC and The Washington Post, show — and it’s likely to become more unpopular as it receives more attention.
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The more you read about this hastily compiled bill, the more reasons there are to oppose this terrible piece of tax policy. This is nothing but a sop to the GOP’s wealthiest donors at the expense of American workers.
Call your members of Congress and tell them to “kill this bill.”