A Tax Bill Becomes, Well, Taxing
Terry H. Schwadron
Dec. 1, 2017
Senate Republicans seemed on their way last night to passing their tax bill, particularly after Sen. John McCain, R-Az, the eponymous maverick, agreed to back it. Then the small; group of Republican senators most concerned about deficits pushed back, and the bill was being rewritten overnight.
The nonpartisan Joint Committee on Taxes released its analysis Thursday of the Senate GOP tax bill, concluding that it will not produce enough economic growth to fully pay for its tax cuts. Rather it will increase the deficit by $1 trillion over 10 years. Republicans say the report is overly pessimistic, but because Senators Bob Corker of Tennesee, Jeff Flake of Arizona and James Landford of Oklahoma took it seriously, Republicans went to town overnight to find ways to raise an extra $350 billion in tax revenue.
That’s right — enacting a bit of a tax hike to pass an overall tax cut.
Still, they may all vote on it this morning.
Great. A vote on a bill no one has read, that does the opposite of what backers say it does, and that will change a lot of things that have nothing to do with taxes.
Democrats are AWOL, of course, not wanting to be associated with a bill that they see as a pastiche of tax breaks that favor corporations and the rich. Generally, Republicans, who need a win, emphasize those elements that provide an immediate, if not lasting modest break in taxes for many taxpayers.
Generally, the parties have reversed traditional roles over deficits. Usually Republicans are steadfastly against increasing the deficit. This bill will increase the deficit by $1.5 trillion, not a small amount. The argument, growth will pay for the bill.
It’s a bad bill.
Though the economy is on the move now pretty solidly, President Trump and Republicans want to feed it “rocket fuel” towards a much fast growth rate.
Still, surveys and conferences with CEOS suggest repeatedly that most companies will use and saved tax money to buy back stock or to reduce corporate debt or to offer stockholders bigger dividends rather than expand and to add jobs or to offer wage increases, as the Republicans suggest will happen.
One side issue to get deficit-minded senators fully on board their tax overhaul may be on a collision course with Senate rules. Senators Corker, Flake and Landford are considering a trigger mechanism in the plan that would impose automatic tax increases if their tax cuts don’t jog the economy as much as they hope.
Another involves winning the vote of Sen. Susan Collins of Maine who wants an unrelated bill to move at the same time that offers to keep health care supports in place for two more years.
Of course, to me, a larger issue is the annual federal budget which must be decimated to save enough money to pay for the tax cuts and for a huge military spending increase. The true effects of the tax bill may well be in the elimination of huge swaths of other government spending to help pay for the missing tax revenue.
Let’s remember that this bill is messy. Among other things, it is a bill that:
— Makes permanent corporate tax cuts, but does not make tax breaks for individuals permanent. Rather, every analysis says middle class homeowners will be paying more after 2026, not less. Republicans say we need it to boost the economy, which is already moving along quite well.
— Favors the rich by percentage of cut as well as by real dollars with elimination of estate taxes, alternative minimum taxes and consolidation of tax brackets. Republicans put the emphasis on exempting the first $12,000 from tax or $24,000 for a couple if taxpayers do not itemize; they call this simplifying. It eliminates deductions for medical costs, student loans, state and local taxes, and reduces deductions for mortgages, depending on which version of the bill is under discussion.
— Donald Trump says will not help him personally. While impossible to prove since Trump will not share his tax returns publicly, every analysis says he is wrong. The elimination of the estate tax alone will save his family millions of dollars; so too, the elimination of the alternate minimum tax will directly save Trump money. The one year for which there were partial tax returns, the alternative minimum tax accounted for the great bulk of the tax he paid.
— It eliminates the health care individual mandate, a move that will further destabilize health care markets and cause health care prices to spike for seniors and those facing serious illness.
— It adds anti-abortion language that has nothing to do with taxes.
— The Senate bill changes the method by which “cost of living” changes are measured to slow down increases that show up in Social Security or Medicare payments or earned-income tax credits. Over 10 years, that change alone will cost working families $31 billion.
— It allows for oil drilling in the previously protected waters off Alaska, a sop to get the Alaska senator’s vote, and allows churches who pay no tax to get involved formally in politics.
— It offers tax breaks to owners of private planes and golf courses. Hmmm.
— The Senate version also has a tax break for makers of beer, wine and spirits, for no apparent reason.
There are ample reasons to vote no.
Still, it looks as if Senate Republicans will find a way to Make American Corporations Great Again, and that is depressing.