The Trump-GOP claims about the impact and economic benefits of corporate and individual tax cuts they’re rushing through Congress are betrayed by the fibs, fudges and gimmicks employed to justify and pass them.
There’s some egregious and troublesome tax changes in the House and Senate tax plans, but set aside arguments over the wisdom of individual changes and what emerges is a picture of purposeful manipulation to stay within the $1.5 trillion ten year deficit allowed in previously adopted budget parameters so their plan can pass the Senate with a Republican party line vote instead of the 60 votes that would otherwise be required to avoid a filibuster.
They say it will be revenue neutral because the cuts will stimulate so much growth, costs will be offset. Yet the Joint Committee on Taxation Analysis of the House bill passed on November 16, and the pending Senate bill, estimates the resulting ten-year deficit will be about $1.4 trillion.
The House bill barely stays within the $1.5 trillion limit because some middle class reductions expire in 2022 and it lowers inflation measures so lower incomes move from the proposed 12 percent bracket to the higher 25 percent bracket faster.
The Senate bill stays under the limit because it makes the corporate tax reduction from 35 percent to 20 percent permanent but makes the cuts for households and individuals temporary.
It also reduces costs by eliminating the Affordable Care Act individual mandate, which reduces deficits because the JCT and Congressional Budget Office estimates 13 million more won’t be able to afford insurance and thus won’t get tax credits for health care premiums.
They say everyone gets a break. But the JCT concludes in 2023 only 40 percent would pay less and 22 percent would pay more. Under the Senate bill, the JCT estimates tax increases for low-income households would grow sharply beginning 2021. Most earning less that $75,000 or less would pay more in taxes, while those making over $100,00 would pay less.
Don’t worry they say, we won’t let the temporary cuts expire. But if they don’t that means the deficits will only get bigger than estimated, but the increase won’t be included in the calculations needed to fit under the $1.5 trillion limit.
The Congressional Budget Office predicts the tax cuts would increase the ratio of public debt to GDP from 77 percent in 2017 to 91 percent in 2027. If temporary reductions are made permanent later, it will be even worse.
They admit they are playing games. White House Budget Director told NBC’s Meet the Press that making things expire is one way to game the system to “shoehorn the bill into the rules.”
Don’t worry they say, economic growth will offset the cuts and increase wages. Trump even says the average family will get a $4,000 raise under the plan. But the House bill moved so fast the JCT didn’t have time for a macroeconomic analysis.
Others have and it’s hard to find economists who think the tax cuts will generate the 6-8 percent faster growth needed to offset the costs. Even the more conservative Tax Foundation, which predicts 3.5 percent growth over the next decade, concludes it will still add $1 trillion to the debt.
As for wages, most economists, and a lot of CEOs, know it isn’t lower taxes that impact hiring and wages, it’s consumer demand and the labor market. Corporate profits have piled up in the last decade but wages remained stagnant.
The benefits of cutting corporate taxes are more likely to go to stock buybacks and dividends that benefit investors. Perhaps that’s why they also admit they have to pass something to appease the wealthy campaign donors threatening to close their wallets.
It happens that, true to Trump form, the GOP tax plan boasts are highly inflated, often simply untrue. So much so that even Congress’s own official non-partisan budget scorekeepers like the Joint Committee on Taxation and the CBO contradict them.