There is no shortage of critics of the Republican “Tax Cuts and Jobs Act;” i.e., the tax bill that hands $1.5 trillion in permanent tax breaks to corporations and the wealthy like President Trump and his ilk.
Even Sen. Marco Rubio (R-Fla.) admitted the bill goes too far–after it was passed, of course.
Most, though, have dismissed concerns, insisting the projected economic growth will ultimately result in the tax cuts “paying for themselves.”
But what say those who have made careers in the financial sectors, those who best know the economy and budgets?
Jack Lew, who served as former President Barack Obama’s Treasury Secretary, expressed concerns about the new tax law’s impact on the national debt.
He argues it could “leave us broke” and fears how the deep cuts to social safety programs like Social Security could blight our country for decades.
Lew said in a Bloomberg interview:
“I fear that the next shoe to drop is going to be an attack on the most vulnerable in our society. How are we going to pay for the deficit caused by the tax cut? You’re going to see proposals to cut health insurance from poor people, to take basic food support away from poor people, to attack Medicare and Social Security. One could not have made up a more cynical strategy.”
Instead of crippling cuts, Lew asserts what the country needs is investment more jobs training, education, and infrastructure.
He states:
“What we’ve seen is a tax cut that spends money we don’t have, to have very concentrated benefits for global corporations and the top 1 percent, and it’s leaving us broke so that we cannot deal with these fundamental problems.”
The tax plan President Trump signed into law before leaving for Mar-a-Lago for the holidays accomplishes the following:
- It slashes the top individual tax rate from 39.6% to 37%.
- The corporate tax rate falls to 21% from its current 35%.
- There is a 20% deduction for the first $315,000 of qualified business income for “pass through” entities–businesses not registered as corporations–such as law firms and doctors’ offices, worth $600 billion.
- Income above $315,000 phases in limits, ultimately culminating in an effective marginal tax rate of 29.6%.
- The previous 20% corporate alternative minimum tax, designed to prevent the wealthy and corporations from avoiding taxes entirely, is repealed.
- Those who make more than $1 million will enjoy a tax of cut $5.8 billion a year.
- Cuts will trigger PAYGO, a 2010 law requiring cuts to Medicare and other programs to offset deficit increases. This includes federal student loans, foster care subsidies, and Meals on Wheels funding.
- $25 billion will be cut from Medicare by 2018, $400 billion over the next decade.
- Gone is the estate tax worth $150 billion.
- Over $200 billion in cuts will be put toward a provision allowing a greater deduction for dividends on foreign earnings.
- Important state and local income tax deductions on which working Americans rely are eliminated.
- The individual mandate required under the Affordable Care Act (Obamacare) is repealed, leaving around 24 million Americans without healthcare and jacking up healthcare premiums.
- The “carried interest” loophole for private equity fund managers and some hedge fund managers remains.
- Oil companies will now be permitted to drill in Alaska’s Arctic national wildlife refuge (ANWR).
The hardest hit will be builders, small business owners, residents of higher-taxed states like California and New York, the working poor, and charities.
Public sector employees will watch their incomes decline, but corporations will be still be able to benefit from the same deductions they always have.
The Joint Committee on Taxation (JCT) estimates the plan will add about $1.5 trillion to the deficit over the next decade before accounting for economic growth. It will also add about $1.1 trillion to the deficit.
Secretary Lew’s fears are not unreasonable.
Despite their public confidence in the new law, GOP lawmakers are expected to advocate welfare “changes” next year in an effort to cut the debt the law will incur.
Speaker Paul Ryan (R-Wis.) has been pushing for entitlement reform his entire tenure in the House.
Senate Majority Leader Mitch McConnell (R-Ky.) seems reluctant to unless subsequent legislation receives bipartisan support.
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