Greg Sargent (Washington Post/Plum Line) explains that The Trump tax plan is much worse than you thought. A new analysis confirms it.. Snippets follow.
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.
Sargent runs the numbers:
… 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 …
[Sargent’s analysis 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.
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.
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?
Jennifer Rubin (also at the Washington Post) warns that It’s time for moderates to moderate the tax bill. She observes that there are tax policies and practices, other than our own, that work fine.
… Republicans can do something positive and pass tax reform with a substantial majority. They could, for example, go bold and look to Sen. Ben Cardin (D-Md.). He’s described a tax bill of the type many conservative economists favor:
The Progressive Consumption Tax Act creates a Progressive Consumption Tax, or “PCT,” that changes the way the federal government raises revenue. Rather than taxing income, the PCT generates reasonable revenue by taxing the purchase of goods and services. This revenue is used to exempt most households from any federal individual income tax liability and significantly lowers the corporate income tax rate. Low- and middle-income families would be protected from unfair consumption taxation through a PCT rebate, and important benefits would be retained in a much simpler income tax code.
Every other developed country in the world, including all other Organization for Economic Cooperation and Development (OECD) countries, have a consumption tax. A progressive consumption tax would improve America’s international competitiveness by putting American-based businesses on a level playing field with foreign businesses and by lowering the U.S. corporate tax rate below the OECD average. Although consumption taxes are already imposed by many countries around the world, the Act’s reforms would be new to the U.S. tax code.
In sum, the way to do smart, bipartisan tax reform is to stop a dumb, partisan tax bill. Then Collins, McCain, Flake, Corker and others can reach across the aisle and find an accord with red state and reform-minded Democrats. They can proceed with careful, deliberate legislation to build consensus. If they are true to their word, they will be regarded as true political and policy heroes. If not, they unfortunately will join the ranks of disingenuous pols who talk a good game but perpetuate rabid partisanship and vote for fiscal irresponsibility and tax cuts for the rich.
In the meantime, the Republicans continue to brazenly lie about the tax bill and who it helps and who it hurts. AZBlueMeanie at Blog for Arizona documents the lies in GOP resorts to lying about its tax bill (part one) and GOP resorts to lying about its tax bill (part two). He cites Paul Krugman’s scathing essay, Lies, Incoherence and Rage on Tax Cuts.
How can Republicans like Paul Ryan, the speaker of the House, pretend to be helping the middle class? It depends crucially on a new kind of budget gimmick: Both the House and Senate tax-cut bills do contain some middle-class tax breaks — but only for the first few years. Then they expire.
Take one of Ryan’s favorite examples, a family with two children and earning $59,000 a year. That family would indeed get a tax break next year. But the break would rapidly dwindle and turn into a tax increase by 2024.
… we’re really looking at an unprecedented level of dishonesty here. But what happens when you try to explain what’s going on? When Senator Sherrod Brown tried to point out, correctly, that the Senate G.O.P.’s tax bill heavily favors the rich, Senator Orrin Hatch exploded, calling it “bull crap” and asserting that he grew up poor (which is relevant why, exactly?)
Sorry, but this isn’t the righteous anger of a man falsely accused of wrongdoing. It’s the rage con men always exhibit when caught out in their con.
But what’s the con about? The very incoherence of the arguments Republicans are making for their plans shows that it’s not about helping the economy, let alone ordinary families. It really is about making the rich richer, at everyone else’s expense.