Tag Archives: tax cuts

The Horrific Truth

The GOP’s tax “reform” bill has now been unveiled. Reform it isn’t.

I guess all sentient beings already knew what was coming…but Krugman’s accurate prediction distills its awfulness.

Republicans in Congress know perfectly well that Trump is utterly unfit for office and has been abusing his position for personal gain…

If they nonetheless circle the wagons around Trump… there will be one main reason: Trump offers their big opportunity to cut taxes for the very wealthy. Indeed, the nonpartisan Tax Policy Center estimates that almost 80 percent of the Trump tax cut would go to people with incomes over $1 million; these people would get an average cut of around $230,000 a year.

Now that Ryan and crew have unveiled the plan’s specifics, there is something for everyone to hate. According to Americans for Tax Fairness, the plan jeopardizes Social Security, Medicare, Medicaid and public education; it repeals the Alternative Minimum Tax (which insures that rich people with write-offs pay at least something), slashes corporate taxes and vastly increases the deficit (whatever happened to those GOP “deficit hawks”?)

Talking Points Memo zeroed in on what it identified as the five most controversial provisions; although I agree their chosen provisions are horrible, there are arguably others that are even worse. (I’m particularly incensed by the utterly insane attack on environmentally-friendly provisions; the bill eliminates tax credits for electric vehicles, and raises taxes on clean energy.)

TPM points out that changes to the treatment of mortgage interest and property taxes will have a negative effect on the value–and sales price–of homes. Those of us who factored in these deductions when we bought a home will be selling them to people who won’t get those deductions–and won’t be willing to pay as much.

The bill eliminates a deduction for medical bills that currently only benefits very sick people with high medical costs. It will hit senior citizens and the critically ill, giving new meaning to “kick ’em when they’re down.” It will also eliminate deductions for contributions to  certain medical savings accounts, and the tax credit for companies that make drugs that treat extremely rare diseases. (Without that tax credit, even fewer pharmaceutical companies will bother…)

The enormous amount of student loan debt has been identified as a major drag on the economy, so the “reform” bill makes it worse, eliminating the deductibility of interest on those loans.

We will no longer be able to take a deduction for state and local income taxes. I’ll just leave that one here for you to ponder.

And in the “fine print,” our happy theocrats buried repeal of the  “Johnson Amendment”—the 50-year-old policy that churches lose their tax exempt status if they endorse candidates or engage in partisan politicking from the pulpit.

Repealing the Johnson Amendment isn’t the only culture war provision hidden in the dry language of tax policy. Welcome to “Fetal Personhood.”

Congressional Republicans are using their new tax plan for more than tax breaks for corporations and the rich. Their plan gives fetuses federal benefits in an apparent attempt to codify the view that life begins at fertilization—and to take another swipe at legal abortion.

Let me go on record as favoring a first-trimester abortion for this bill, which was conceived through incestuous relations between America’s plutocrats and their legislative prostitutes.

“Tax” Is Not A Four-Letter Word

As Congress takes up consideration of the tax bill of 2017–what the President and GOP have labeled “tax reform,” and what impartial observers describe as tax cuts mostly for the wealthy–it’s time for a re-run of my rant on the subject of taxation.

I’ve been particularly incensed by the appearance in Indiana of a TV spot aimed at Senator Joe Donnelly. Donnelly is a Democrat (moderate, of the Hoosier variety) considered vulnerable in 2018. The spot features a lovely young woman talking about the importance of tax reform–no specifics, no definitions, just a plea to Donnelly to support “fair” taxation.

I’m all for fair taxation, and I’m willing to bet everyone reading this is, too. I’m also willing to bet that definitions of a “fair” tax system vary widely (the devil, as we all know, being in the details). The one thing we should all recognize, however–whatever our personal opinions about “fairness”–is the difference between tax reform and tax cuts. 

As Jared Bernstein recently wrote in an article in the American Prospect,

In D.C. tax-debate parlance, “tax reform” means something specific: cutting tax rates and broadening the tax base. Rate reductions lose revenue, but you make it up by closing loopholes, exemptions, and favorable treatments of one type of income over another, thus broadening the income upon which taxes are levied.

As Bernstein points out (and we all know), most loopholes are the result of lobbying by special interests, not some disinterested analysis of their utility, making them very hard to eliminate. Even more pernicious is the belief–an article of faith in the GOP–that lower rates will generate more economic activity and thus more tax revenue. There is absolutely no evidence supporting this theory, and considerable evidence rebutting it, but it refuses to die.

In the current tax debate—no surprise—the Trump administration and the Republican Congress are predicting that their tax cuts will return large growth effects. They claim their plan—and to be clear, there is, as of yet, no plan—will increase the real GDP growth rate by at least half, from around 2 percent to 3 percent or 4 percent, and that this increase will offset much of the costs of the cuts.

This was the same story told by Reagan, Bush I, and Bush II, and in every case the results belied the claims. The most recent example, from the state of Kansas, is particularly germane to this discussion, because it reveals flaws in the same ideas being bandied about by the current Congress.

Tax policy experts estimate that the measures being discussed would cost government $6.5 trillion in revenues over ten years, and dramatically increase the deficit the GOP pretends to care about.

The vast majority of the benefits of these measures accrue to the wealthiest households: Almost 50 percent of the cuts go to the top 1 percent, while 6 percent go to the middle fifth. About 27 percent of the gains go to the 120,000 families in the top tenth of the top 1 percent, whose average pretax income is $11 million.

If anything remotely like this package passes, it will exacerbate levels of inequality that already exceed those of the Gilded Age.

According to the Brookings Institute,

this tax reform plan gives a lift to growing inequality, and signals that the GOP is okay with persistent poverty and with the inability of one-third of us to feed our kids. It’s time to ask ourselves, how do we craft tax reform for the long term—reform that tackles American poverty and inequality and creates the conditions for inclusive economic growth?

I would suggest that genuine tax reform begins with the recognition that “tax” is not a four-letter word. Taxes are the dues we pay for social peace and stability, for the myriad of services that modern societies require and their citizens demand, and from which we all benefit.

We currently have a system that incentivizes the “haves” to evade their responsibility to pay a fair share, or even to discuss what a fair share would look like. Until we have that conversation, we may see tax cuts–mostly for the already privileged– but we won’t see anything resembling genuine tax reform.

 

 

Myths Die Hard

Andrea Neal’s editorial in the Indianapolis Star yesterday was a reminder that evidence is no match for strongly-held beliefs.

Neal seconded Governor Pence’s ill-considered call for a ten percent reduction in Indiana’s income tax. Even the Republicans in the General Assembly have recognized how harmful such a tax cut would be in a state where cities and towns are already strangling, thanks to the even more ill-considered tax caps Mitch Daniels managed to enshrine in the Indiana constitution.  Neal made a familiar argument: lower taxes will lead to more economic growth and more job creation.

This argument sounds logical. Leave businesses with more cash and they’ll spend it to expand and hire. I remember being persuaded by that theory myself when I first became involved in policy and political life. The problem is, the evidence refutes it.

A recent report by the Institute on Taxation and Economic policy confirms previous research. As the Institute reports,

States that levy personal income taxes, including the states with the highest top rates, have seen more economic growth
per capita and less decline in their median income level over the last ten years than the nine states that do not tax income.
As any economist will confirm, the factors facilitating economic growth and job creation are varied; despite the almost religious belief in the supernatural power of tax policy, most studies suggest that tax levels are only one of a large number of factors that influence business decisions. The availability of an educated workforce, a location near suppliers or large customers, the existence of a market for one’s goods or services, cost of living, and the general quality of life  all play a part.
For many employers, the availability of public transportation so that employees can get to their place of work is extremely important; indeed, decent public transportation would do far more for the Indianapolis economy than a tax cut that further erodes public services and the quality of life.
Think about it: how low would taxes need to be before you’d move your business to Mississippi?