Saturday, November 11, 2017

Ryan’s tax plan shafts American families. For the middle class “at least it’s something.”

The G.O.P. Tax Plan Has a Fatal Flaw—and Neither the House Nor the Senate Can Fix It. According to John Cassidy at the New Yorker, it is this: The tax plans pushed by Paul Ryan and the Republicans cannot benefit both businesses and households.

… The [Senate] proposal follows the basic framework of the [House] Ryan plan: slashing the corporate tax rate from thirty-five per cent to twenty per cent and giving a big tax cut to Donald Trump and other owners of unincorporated businesses. …

So the bottom line is that households lose to businesses. Read on.

We don’t yet have any independent analyses of how the Senate proposal would affect different income groups, but in this aspect, too, it is likely to track with the Ryan bill. According to a new analysis by the nonpartisan Tax Policy Center, the Ryan bill would give taxpayers in the middle twenty per cent of the income distribution in 2018 a tax cut of eight hundred and forty dollars, or $16.15 a week, on average. Compared to the $37,440 break that taxpayers in the top one per cent would receive, that’s not very much. But at least it’s something.

I guess that’s the fiscal sop thrown to American families by Ryan and the GOP: “at least it’s something.”

This snapshot of the bill’s effect on the “hardworking families” that [Donald Trump’s top economic adviser Gary] Cohn referred to in his CNBC interview, however, is misleading. Over time, the modest tax breaks these people would initially receive would erode—and ten years from now many of them would be paying more money, not less, to the federal government. By 2027, according to other figures contained in the Tax Policy Center’s study, families with children that earn between fifty and seventy-five thousand dollars annually would be subjected to a tax increase of two hundred and thirty dollars a year, or $4.42 a week, on average. Families with children that earn between forty and fifty thousand dollars would face a slightly larger tax increase, of two hundred and forty dollars, or $4.62 a week.

… how did [the GOP] end up with such a proposal, given the principles they claim to have started out with? In answering that question, it is necessary to take account of arithmetic, the Senate’s procedural rules, and the G.O.P.’s desire to pay back its wealthy corporate and individual donors.

To pass a tax bill with just fifty-one votes in the Senate—rather than sixty—the Republicans must keep the over-all cost of their proposal to $1.5 trillion over ten years. … According to an analysis of the Senate Republicans’ plan that the Joint Committee on Taxation released on Thursday, cutting the corporate tax rate to twenty per cent starting in 2019 would cost $1.33 trillion by 2027. The Senate’s version of the tax cut for unincorporated businesses, which is somewhat different from the one in the House plan, would cost about $285 billion. If you combine these two items alone, you get to $1.62 trillion—which is already over the $1.5 trillion limit.

To be sure, both the House and the Senate bills include some offsetting revenue raisers on the corporate side, mostly by limiting various types of deductions. But even after accounting for these offsets, the cost of the business tax cuts comes to more than a trillion dollars. That greatly limits the scope for universal tax cuts on the personal side, and so does the G.O.P.’s determination to abolish the Alternative Minimum Tax, which is designed to insure that wealthy people with clever accountants, such as Trump, pay at least some federal taxes. Over ten years, getting rid of the A.M.T. adds another seven hundred billion dollars to the tab.

The upshot of all this is that the Republican tax proposals, which Trump has promoted by promising the biggest tax cuts in history, isn’t much of a tax cut at all in the sense that most Americans understand the term. It’s really designed to reduce the tax burden on businesses and wealthy individuals, and it could only be justified if, defying history, it delivered the economy-wide upsurge in G.D.P. growth, capital investment, and wages that the White House has promised, and which Cohn talked about in his interview. The supposed middle-class tax cuts are a fig leaf. And when you lift up the leaf, the truly regressive and deceitful nature of the bill is revealed. Unless the Republicans shift course entirely, nothing can change that.

That is, unless we take to the streets and demand a progressive tax plan that benefits families more than wealthy individuals. In the absence of unrelenting political pressure applied by the public, American families will get the shaft concealed by Ryan’s fig leaf.

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