Many fear it’s going to pass.
Those on the right are still trying to sell it as a sweetheart deal for the American people, because it will “cut taxes.”
True, it will.
But not ours.
Alan Viard, tax expert at the conservative American Enterprise Institute, said:
“The best thing in the bill is lowering the corporate tax rate. The worst thing is the increase in the deficit. I would’ve preferred a revenue-neutral tax reform.”
Despite apparent widespread support among Republicans, Viard’s tepid endorsement is appropriate.
There are several glaring problems with the bill we should all consider.
First, how it’s paid for.
Basically, it won’t be.
For the first decade, Republicans are leaving around $1.5 trillion on the nation’s credit card.
Even so-called “dynamic estimates” show significant revenue losses.
Alan Viard said:
“I co-authored a paper on tax policy lessons from the 2000s, and we looked at the long-run growth effects of deficit-financed tax cuts. In general, we found deficit-financed tax cuts were not a very good idea for growth. To be reliably pro-growth, the best thing you could do is make it revenue neutral.”
George Mason University economist, Tyler Cowen, concurs:
“If there’s some plan to address deficits, it’s very different than if there’s not.”
The economy is growing, unemployment is low, so now is the time to eliminate debt to protect ourselves from the next recession.
13 million people, however, would be left uninsured.
It would also force out of insurance markets younger and healthier Americans necessary to keep costs low.
The bill also creates an impressive loophole for tax accountants.
Tax expert Dan Shaviro argues the bill’s loopholes will do little to help the economy; instead, they will be windfalls for tax lawyers, such as the “pass-through” loophole, which would allow businesses that file taxes under the individual tax code to pay less than either corporate or individual taxpayers.
This would incentivize individuals and corporations to attempt to officially classify themselves as “pass-throughs.”
Something else to consider is that, under the bill, by 2025, the individual tax rate cuts expire, as does the expanded child deduction and doubling of the standard deduction.
Corporate tax cuts, however, would be permanent.
If individual deductions were also permanent, the bill would cost much more, and it wouldn’t be subjected to the filibuster-proof reconciliation process.
So Republicans are deciding to protect their billionaire donors–instead of average Americans–with a permanent firewall.
The conservative Heritage Foundation’s Stephen Moore told the Washington Post:
“It’s politically brilliant, and that’s infuriated the left. How else are you going to fit a $3 trillion tax cut into a $1.5 trillion box?”
That’s one reason this bill threatens to worsen income inequality, not combat it.
According to the Tax Policy Center, by 2027 more than 75 percent of the tax cuts would benefit the top five percent of the economic spectrum; more than 60 percent would go to the top one percent.
“Post-tax corporate profits as a share of GDP have hovered at a record-high level for the last seven years, and the top 1 percent’s share of total income is higher than any time in the second half of the 20th century.”
So what would Republicans be doing if they actually cared about economic growth, the debt, and income inequality while pandering to their corporate masters?
Instead of all the “pass-through,” individual mandate repeal, expiring individual deductions nonsense, they could expand the child tax credit, make it more valuable to those who don’t pay income taxes, boost the earned income tax credit, and cut the bottom few tax rates.
According to Vox:
“The GOP could pay for the proposal by cutting tax deductions used by the rich — some of the ideas in the legislation now, like capping the mortgage interest deduction, are worthwhile, and Republicans could add more of them if needed. A bill like this would bring more benefits, cause fewer problems, and might even get some Democratic votes”.
As former President Barack Obama’s chief economist, Jason Furman, said:
“I don’t understand why they didn’t just do a corporate tax cut plus a really attractive middle-class tax cut.”
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