House Tax Plan Heads for A Pratfall

House Republicans finally released their secret tax plan last week with great fanfare and a flurry of misleading statements about how great it will be for the middleclass.  They call it the Tax Cuts and Jobs Act (TCJA).  This reminded me of a joke by one of my fishing buddies years ago.  He claimed he intended to publish a magazine entitled “Guns and Pickups.”  That title, he said, made it a guaranteed success with most people he knew.

The 429 pages of the TCJA will be voraciously analyzed by numerous tax experts.  To be sure, this is complicated stuff.  But the bill has already been scored by the Joint Committee on Taxation (JCT), a nonpartisan group of experts whose purpose is to provide assistance on tax legislation for members of both parties in the Senate and the House.  The JCT estimates that this legislation will add $1,487 billion to the deficit over the next 10 years.

Although some Republican Senators are paying lip service to the national debt of $20 trillion and vowing not to “add a penny to the deficits,” I haven’t heard one of them discuss the actual deficit facts – and they are brutal.  The Congressional Budget Office projects that deficits over the next decade will be around $10 trillion under current law, raising the national debt to $30 trillion.  So Republicans want to add almost $1.5 trillion to that?  Really?

The right-leaning Tax Foundation and the left leaning Tax Policy Center will have significantly different estimates of the deficits created by the TCJA.  But I’m inclined to rely on the JCT nonpartisan results.  This is what those numbers and my somewhat crude analysis tell me about the proposed tax cuts for individuals.

Consolidating the tax rates into four levels of 12, 25, 35 and 39.6 percent, establishing a 25 percent rate on so-called “pass though” income from non-corporate business activities, repealing the alternative minimum tax, and repealing the estate tax after 2023 mostly benefit wealthy individuals.  These provisions would reduce federal revenues by $2,404 billion over 10 years.

Doubling the standard deduction and increasing personal and child tax credits mostly benefit middleclass and lower income taxpayers and would reduce federal revenues by $1,553 billion.

To offset part of the lost revenue, Republicans want to repeal the personal exemption of $4,050 per person.  This provides $1,568 billion in added revenues but it eliminates a tax benefit that helps many middleclass and lower income folks with families more than the increased standard deduction.  Plus, the tax credits go away after 2023, causing some lower income folks to pay more in taxes than under current law.

To offset more lost revenue the TCJA repeals most itemized deductions, which recoups $1,253 billion of it.  But some of these deductions benefit upper middleclass and even middleclass taxpayers, particularly those who live in high tax states or those who have large medical expenses.   Sure, the wealthy lose deductions too, but the current law already phases out up to 80 percent of itemized deductions for them.

Republicans keep trying to put some middleclass lipstick on this pig but it’s still — well, pork for the wealthy.

House Speaker Paul Ryan, the seemingly nice guy family man from Wisconsin, claims a middleclass family of four earning $59,000 a year would pay $1,182 less in taxes in 2018 than they would this year.  But since the tax credit benefits in the TCJA phase out by 2024, this family would end up paying more in taxes according to David Kamin, a tax professor at New York University.

The TCJA and the GOP legislation to repeal and replace Obamacare were hatched in the same way.  Congressional Republicans established their nefarious goals and then cobbled together the legislation in secret to achieve them.  Like the Obamacare replacement, they want to pass a bill without Democratic votes so they won’t have to compromise.  Republicans are loath to agree with Democrats on much of anything, particularly taxes and health care.

So while President Trump is sabotaging Obamacare and driving up the cost of premiums, several conservative, billionaire-funded organizations are spending millions on TV ads to sell his budget busting tax plan to middleclass Americans.  According to the Washington Post’s Dana Milbank some of these ads claim that the average family will receive a benefit of more than $1,200 per year.  Hell, that’s not even enough to cover the rising premiums for one month on their health care plan.

Republicans are REALLY DESPERATE to pass a tax cut for their wealthy backers.  Imagine a Republican congressperson’s mother standing in the way of getting this legislation done. She would be mowed down like a stalk of wheat in front of a fast-moving combine.

Polls show that the majority of Americans oppose the House tax plan and six out of ten think it favors the rich.  Senate Republicans aren’t enthusiastic about it either and plan to draft their own proposal.  Isn’t that the way the Obamacare replacement started?

And looming in the legislative headlights is the December 8 deadline for funding the government and increasing the debt limit.   Will the three stooges of government — Trump and the House and Senate Republican’s — get their act together to accomplish this and tax cuts too?  Who knows?  Their slapstick comedy show would be funny if the issues weren’t so serious.

 

 

About eeldav

I am a retired corporate attorney who has lived in both Europe and Asia. While working my responsibilities took me to over 40 countries in Europe, the Middle East, Africa and Asia.
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