Tuesday, November 28, 2017
The steaming pile of offal (aka "tax reform")
If you are having a difficult time following the ins and outs of this steaming pile of offal known as "tax reform" wending its way through the senate right now, I thought I would share this handy overview from the New York Times David Leonhardt's daily briefing. The details are changing constantly, but it's just getting worse. At this point it's unknown if they'll get this through but if it fails it will, once again, only be because a couple of Senators decide not to blow up the country that day.
The independent evaluations of the Trump tax plan have been rough. They show a plan that deeply cuts taxes on the wealthy, causes the deficit to jump and does little to lift economic growth.
Yet the plan’s defenders continue to describe it as a “beautiful” thing (President Trump’s word) that would transform the economy and bestow gifts on ordinary Americans. How do they keep making these claims? I count four major tactics that they’re using:
1. Describe the benefits of a different tax plan — and make it sound as if they’re talking about this one.
A group of longtime Republican economists took this approach in a long open letter, published yesterday by The Wall Street Journal. It’s titled “How Tax Reform Will Lift the Economy,” which sure sounds like an article praising the current plan before the Senate.
But it actually describes a very different plan, a “revenue-neutral” plan that would offset its corporate tax cuts with fewer corporate loopholes. The Senate bill is radically different from this imaginary plan the economists are praising. Instead of being revenue neutral — technical talk for a bill that neither grows nor shrinks the deficit — the Senate plan would increase the deficit by more than $1 trillion over its first decade.
The open letter is just one example of this deception. The bill’s defenders frequently say some version of, “We need tax reform.” But their plan bears little resemblance to meaningful tax reform. It’s akin to telling someone, “You need a new car,” and then giving the person a lemon.
(For those who want more detail on the open letter, Jason Furman walks through its distortions in more detail.)
2. Talk about the plan’s middle-class tax cuts — and ignore the middle-class tax increases.
The plan is a windfall for the wealthy, but it’s quite mixed for the middle class and poor. Some provisions raise taxes on the middle class and poor. Others cut taxes. Long term, most families would probably be worse off, as I’ve explained before.
One favorite sleight of hand from the plan’s supporters is to talk only about the provisions that help the middle class and conveniently fail to mention the other parts.
Take Senator Rob Portman, the Ohio Republican, who went on “Meet the Press” this weekend to sell the bill. “The middle class tax cuts are in there,” Portman said. “It doubles the standard deduction up to 24 grand for a family. It doubles the child tax credit. It actually — it lowers the rates.”
All that is true. Unfortunately, Senator Portman left out the elimination of the personal exemption, which protects $4,000 per person from income taxes. He left out the elimination of various tax breaks that help the middle class. And he left out the introduction of a new inflation measure that will push more families into higher tax brackets over time.
3. Pretend that the future will never arrive.
To hold down the estimated cost of the bill, Senate leaders have set some of its biggest provisions — the ones that most benefit the middle class — to expire over the next decade. The corporate tax cuts, by contrast, are permanent.
But when the plan’s defenders describe the bill, they tend to be talking about a point before the bill is fully implemented — without admitting as much. If you hear a senator talking about a $1,000 tax cut that a typical middle-class family would receive, it’s in one of the plan’s early years.
(If you hear a senator talking about a bigger tax cut, as Portman and many others do, they’re usually talking about the upper middle class or affluent without saying so.)
By the time the bill is fully implemented, it will be a net tax increase on every income group below $75,000 a year. It will also leave federal taxes virtually unchanged for families making between $75,000 and $100,000. For the wealthy, it’s still a tax cut.
And all of these estimates understate the long-term damage to the middle class, because they ignore the cuts to education, transportation, Medicare, Medicaid and Social Security that will eventually be necessary to reduce the deficit.
4. Rush, rush, rush.
Perhaps the biggest giveaway about the plan is the way that its supporters are trying to push it through Congress as quickly as possible.
They’re not holding hearings where experts can debate the content of the plan. They are not even waiting for a final analysis from Congress’s official tax arbiter, the Joint Committee on Taxation. They understand that facts and debate hurt their cause. They are hoping that partisan loyalty is strong enough to overcome substance.
Related. “If the tax bill is so great,” Catherine Rampell asked in a recent Washington Post column, “why does the GOP keep lying about it?”
“Why would anyone write a bill full of provisions that evaporate over time?” Paul Krugman asks. “There’s no economic or policy logic behind it. Instead, it’s all about trying to have it both ways, making a safe space for political double talk.”
Poll after poll has shown that the tax plan is deeply unpopular, typically with a national approval rating around 30 percent. Three new polls show that the plan is similarly unpopular in Arizona, Maine and Tennessee, three states with swing-vote senators.
In fact, it’s not clear any piece of legislation so unpopular has ever before become law, as Seth Hanlon notes.
digby 11/28/2017 12:00:00 PM