Nel's New Day

November 3, 2017

Tax Cuts: Who Matters to Republicans in Congress

Filed under: Legislation — trp2011 @ 11:26 PM
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The big GOP tax plan was to be released on November 1, but problems delayed it–perhaps because it wasn’t written and because Dictator Donald Trump (DDT) insisted it be called “The Cut Cut Cut Act.” As Stephen Colbert pointed out, at least he didn’t spell the bill with three Ks. So far, the name has been DDT’s only contribution to the tax “reform” bill; all the other disasters come directly from GOP legislators. Most Republicans and all Democrats were left out of the process that had $5.5 trillion in tax cuts over the next decade while adding $1.5 trillion to the deficit. The proposed bill emerged on November 2 to more publicity than the fast-developing investigation into DDT’s connection to Russia.

As always, DDT was largely ignorant about the nuts and bolts, but he loved the idea of filing taxes on post-card sized papers. DDT was so excited that he kissed the form, but like other relationships, it rapidly disappeared. House Ways and Means Chairman Kevin Brady (R-TX) said that people won’t be filing taxes on the card. DDT will need to go back to his love affair with the flag.

At the very end of 429-page document is a roll-back of a 1954 law that prevents the endorsement of political candidates in tax-exempt houses of worship, but the GOP pride of the bill is a permanent corporate tax rate reduction from 35 percent to 20 percent to benefit companies’ owners. Stockholders will become wealthier without taking any action. Only half the people own stock, and most households own very little. Households in the top 1 percent get 36 percent of their income from financial assets, and the 400 wealthiest households get almost 75 percent of their income from capital gains and dividends. The bottom half of the population will enrich the top half, especially the top 1 percent.

Lowering corporate tax rates also leads to increasing CEO pay and stock buybacks. Profits were not used in either investment or increasing wages and hiring. George W. Bush’s “repatriation” of stashed offshore profits went to shareholder payouts. Today’s enormous deficit comes from Bush’s tax cuts and war—which DDT plans. The corporate cut will cost almost $7 trillion in the next two decades with only $1.4 trillion offset from individual taxpayers.

When Bill Clinton raised taxes on top earners from 31 percent to 39.6 percent in 1993, the economy boomed. It created 23 million jobs and grew the economy for 32 straight quarters, at that time the longest expansion in history.

Winners:

  • The maximum rate for small business is lowered to 25 percent, giving a huge advantage to real estate companies, hedge funds, and private equity funds.
  • Eighty-five percent of this tax cut goes to the top 1 percent of earners because true small businesses don’t make enough to be taxed more than 25 percent.
  • The repeal of the estate tax over $11 million saves the wealthy $170 billion and comprises about 11 percent of the cuts. Estates grow when stock prices increase because of a drop in corporate tax.
  • Taxes owed on $2.6 trillion in profits are cut from 35 percent to 12 percent.
  • Fully three-fourths of tax cuts are directed at businesses and large estates.
  • The top 1 percent, those earning at least $733,000 a year, will each annually receive $130,000.

Losers:

  • The special low tax rate for lobbyists, corporate lawyers and wealthy business owners isn’t available for people who work for a salary or hourly wage.
  • Education, job training, and social services lose $200 billion.
  • The loss of jobs comes from wealthy corporations encouraged to outsource jobs in the U.S. and shift profits offshore through slashed tax rates on foreign profits.
  • The slightly expanded child tax credit from $1,000 to $1,600 expires after five years, followed by increases in taxes, whereas the 20-percent corporate rate is permanent.
  • Even Republicans who tend to “spin” advantages of their bills can’t promise that taxes won’t be increased on middle-class families.
  • Deductions for mortgage interest on new homes stops at $500,000 instead of $1 million. Two heavy hitters, the National Association of Home Builders and the National Association of REALTORS, oppose this provision.
  • Deductions for property taxes ends at $10,000.
  • State income taxes won’t be deducted, causing double taxation.
  • Raising the “standard deduction” $11,300 to $24,000 for married couples while eliminating personal exemptions hurts families with multiple children.
  • Itemized deductions on charitable contributions will continue, but others disappear: property and casualty losses, student loans, the adoption tax credit, teachers’ $250 out-of-pocket expenses for the classroom, alimony payments, and medical expenses. Because the medical deduction doesn’t start until costs over ten percent of income, poor people are the biggest losers, especially because they can no longer deduct nursing home costs.
  • People with disabilities will face more barriers: small businesses will no longer receive a credit for making their businesses more accessible or hiring disabled people.
  • People who earn less than $23,700 a year might expect a tax cut of only $80 a year.
  • About 13 million filers making under $100,000 will have tax increases, a number that will grow as benefits are phased out.
  • The repeal of credits for drug companies to develop new treatments hurts people with rare diseases.
  • Other repealed credits are for electric vehicles and rehabilitation of old or historic buildings, that created 2.4 million jobs and returned $1.20 for every taxpayer dollar.
  • Over one-third of taxpayers have incomes below their standard deduction and personal exemptions.
  • DDT has also pulled any DACA solution from the bill.

Flaws in GOP tax cuts:

  • Giving unearned benefits to people who own or inherit financial assets is not good for growth or productivity. Allowing companies to write off the full value of new capital investments instead of spreading it over years gives a one-time jolt without future growth. The deficit of $1.5 trillion could fund all federal education spending, job training, the threatened Environmental Protection Agency and the State Department, homeless assistance, and welfare many times over.
  • The supply-side economics giving cuts to businesses to create jobs may have worked during the Reagan administration when the highest tax rate was 70 percent—twice what they are now. Now corporations won’t add jobs for products until there is a demand, and giving the bulk of the tax cuts to the wealthy doesn’t create that demand.
  • The growth can also be hurt by an increase in U.S. debt because investors get concerned when the debt-to-GDP-ratio is over 100 percent. That concerns translates into higher interest rates on bonds. The increased debt also takes money from building infrastructure and other job-creation uses.
  • The more than $100 billion in tax cuts to the top 1 percent of earners could fund food stamps (SNAP) and other federal nutrition programs.

The biggest debate about the tax bill may be dropping the corporate tax rate. Although less than half of the people think that taxes on businesses are too high, 60 percent of them want to lower corporate taxes. The going current rate for these taxes may be 35 percent, but most of them don’t pay more than 15 percent. Some examples of corporate tax cheats.

 

DDT blatantly threatened Treasury Secretary Steve Mnuchin and economic adviser Gary Cohn for any glitches in passing the tax cuts. Before he left on his 12-day trip to Asia, DDT said that they will be staying back from the trip to Asia to remain vigilant and making sure the tax cuts pass. So if I have any problems, I will be blaming Mnuchin and Cohn. Believe me, they’ll be hearing from me.” He gave the same spiel about former HHS Secretary Tom Price who is not longer with the administration. Cohn’s arguments will be interesting; he’s already told people that they can use their $1,000 savings to remodel their kitchens or buy new cars.

“Conservative leaders would have slammed this Big-Government Budget under Pres. Obama. Now, they demand Republicans in Congress vote for it,” tweeted Rep. Justin Amash (R-MI). “2011-2016: Principles! 2017: End justifies the means.” The “ends” are getting back donations that dried up after the GOP continually failed to pass any major bills.

A huge winner from the bill is the man who can sign it into law. John Cassidy described how DDT can benefit in three ways:

  • The proposed bill eliminates the individual alternative minimum tax (AMT) legislated to stop the very rich from abusing loopholes. In 2005, DDT paid $31 million because of the tax on his income of $152.7 million. Without the AMT, he would have paid $7.1 million—five percent of his taxable income at an 80-percent reduction.
  • The proposed flat rate for pass-through income would benefit DDT in his hundreds of unincorporated businesses. His $67.4 million in income from these businesses in 2005 would have been subject to the 39.6 percent rate, but his unexplained losses have probably disappeared by now. The proposed bill drops his tax rate to 25 percent.
  • Abolishing the estate tax would eliminate a possible $800 million that his heirs would have to pay from his potential $2 billion of unsheltered assets. When DDT promised people a “big, beautiful Christmas present,” he meant that the gift would be for himself.

Republicans are still tweaking the tax bill. One idea is repealing the individual mandate to purchase health care. The other cuts $81 billion from tax breaks for individual taxpayers by changing the way that the bill measures inflation and move taxpayers into higher-tax brackets more quickly. Again, the proposal would hurt middle-class taxpayers and leave the wealthy to collect their money. Kevin Brady said that more changes would come next week.

Kansas proved that the GOP tax plan won’t work. Children paid for that disaster in the state; they will pay for the disaster in the United States if the bill passes.

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