Maneuvering on Taxes

Terry H. Schwadron

Oct. 28, 2017

Not unexpectedly, the tax cuts proposals are heading through the rocks towards the shore in the Congress over the issue of how to pay for them. The House passed the enabling federal budget outline only by a squeaking majority, with about 20 Republicans defecting to join the Democrats against it.

So, attention will turn again to the Senate, where some Republicans face either abandoning the President or their long-term commitment to no further deficit spending.

All of this takes on added drama because although there is no tax cut bill in hand yet, the President and the Congressional leadership seem transfixes by forcing a positive vote on something in the next three to four weeks. The head of the tax-writing committee in the house plans to introduce a bill in the next week, starting a possibly raucus period of amendment-proposals.

The believers in Trump politics say, rocks be damned, just do it. In fact, if you don’t, we’ll run candidates against you, finance them and make your life miserable. Indeed, they say, with these tax cuts, you can pretend that they are for the middle class instead of the rich, that they will double the country’s rate of growth, and the only issue we will have in the long run is whether we can produce enough Cadillacs and limousines to ferry our newly prosperous selves to the golf club.

The believers in Republican style tax cuts say, yeah, we want tax cuts, particularly if they help people who keep us in office in return, but we also believe in not increasing the country’s deficits, which continue to grow. It’s the problem with trying to remain consistent, of course.

The non-believers, including Democrats, mostly are just sitting there waiting for the smoke to clear. Once again, they have been sidelined unless they are Sen. Joe Manchin from West Virginia or Joe Donnelly from Indiana or Heidi Heitkamp from North Dakota, all of whom face reelection campaigns.

There are too many twists and turns in legislative manipulations to give each a full argument in this column, but, in general, the story is this:

· The President wants tax cuts, immediately, but won’t say what should be in the bill, just what should not be. This reflects a certain distancing as he did in health care, and could end in the same kind of stalemate.

· The Congress, to whom he has given the job of writing a bill, is bristling over the periodic outbursts from the White House about what is and what is not acceptable. To them, this is not leadership, this is butting into the fragile process.

· At the end of the day, everyone knows and is prepared for the fact that we will overspend today’s federal budget by at least another trillion and a half dollars — and expect to see returns only on a wing and a prayer. And, we can be sure that the way to pay for all this, plus a huge build-up of military spending, will be to decimate social spending.

The preliminaries are already moving into place. With anti-spending Republicans looking the other way about the big numbers of deficit spending — something that they would never do with Barack Obama at the White House helm — they are adopting the outlines of a federal budget that offers few details, but give room to expand the deficit.

Even with that extra spending room, the cost of the proposed tax cuts package will exceed the limits.

The tax cut proposal has never fundamentally changed. Its goals:

· Cutting corporate tax rates from 35% to 205 even though virtually no companies pay the top rate. In addition, offering one-time tax incentives to bringing back corporate monies invested overseas.

· Simplifying taxes by offering to double the standard deduction for those who do not itemize, and dropping the number of brackets from seven to four, which aids some and hurts some. Now there is talk of a new, less generous bracket for millionaires.

· Elimination of estate taxes, among others, that benefit the rich, as, indeed, most of the package appears to do. Exempting partnerships and other arrangements for shared income from being treated as income will benefit hedge fund investors, real estate developers, lawyers and franchise business owners, for example.

Along the way, Republicans have been willing to throw just about everything it can out the window to make up the trillions of dollars that will be lost in income. Inevitably, those will affect health, environment, education, culture, basically, just about everything about the way we want to live and define ourselves.

This week, the argument was around whether to severely limit retirement savings programs, something we should all be able to say is something a tax break should be enacted. Of course, the voter-whisperers said this to the President, who announced without consultation with those who are trying to write the tax bill that this retirement savings benefit would not be allowed to change under the tax bill. By the end of the week, that commitment was shaky.

So, we have a rabid set of calls for tax cuts for which there is only an outline and no bill and we have a President who is willing to publicly embarrass and harass anyone who stands up and says there are problems with the bill. We have an inside-out way of describing a program for the rich as a program addressing the middle class. We have deficits being worsened by a tax cut bill promoted by people who say they oppose further deficits.

Maybe the Trump whisperers should point out that none of this makes sense.

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