Nel's New Day

November 20, 2017

Tax cuts: The GOP Has to Do Something!

Filed under: Legislation — trp2011 @ 11:16 PM
Tags: , ,

The U.S. public can give thanks this week because Congress can’t do any damage to us; they’ve all gone home for thanksgiving.  They’ll be back next week, however, when the Senate takes up the House bill that raises taxes on everyone except the wealthy and corporations. Even the conservative publication Forbes thinks that congressional tax “reform” is crazy: it has published a piece called “GOP Tax Bill Is the End Of All Economic Sanity In Washington.”

“There’s no economic justification whatsoever for a tax cut at this time. U.S. GDP is growing, unemployment is close to 4 percent (below what is commonly considered “full employment”), corporate profits are at record levels and stock markets are soaring. It makes no sense to add any federal government-induced stimulus to all this private sector-caused economic activity, let alone a tax cut as big as this one. This is actually the ideal time for Washington to be doing the opposite….

“The GOP’s insanity is compounded by its moving ahead without having any idea of what this policy will actually do to the economy. The debates in the Ways and Means and Senate Finance Committees and on the House floor all took place before the Congressional Budget Office’s analysis and, if it really exists, the constantly-promised-but-never-seen report from the Treasury on the economics of this tax bill.”

On CNN, Budget Director Mick Mulvaney promised that “the president is not going to sign a bill that raises taxes on the middle class, period.” Yet this is what the Senate tax bill does.

 

Information about tax cuts keeps trickling out with these disasters after this post on Nels New Day. Gone are tax credits for plug-in motor vehicles, deductions for medical expenses and moving expenses, write-offs for tax preparation, most tax benefits for college in student loans and tuition waivers for graduate students, deductions for theft or loss of valuables—even in wildfires. Although low-income housing keeps its small subsidy, the bill ends the tax-free status of bonds for financing and repair, which has the same affect as dropping the subsidy. Affected by this loss are all private enterprises serving the public interest such as airports and waste disposal facilities.

A huge drawback to the GOP tax bill is that it continues to move manufacturing offshore. The bill allows manufacturers to pay nothing to the U.S. for its products. CEOs won’t bring foreign profits into the U.S. when their taxes are based on the country where factories are located. The GOP fantasy is that these companies will invest in U.S. jobs. They have not done this in the past, and they have blatantly said they won’t do it with the proposed tax bill. The 15 corporations benefitting most from the 2004 tax holiday cut over 20,000 jobs and reduced their research spending.

A basic GOP premise of tax cuts is to punish blue states and reward red states that already get back more than they pay in federal taxes. The punitive measures come from curtailing or eliminating the deductibility of state and local taxes and dropping the home mortgage interest deduction. Congress also refuses to provide any assistance for the billions of dollars lost to wildfires in the West while giving tens of billions to Texas and Florida for help after hurricane damage. Puerto Rico, which can’t help Republicans win a presidency, will get funding but only through loans.

Republicans claim that dropping health insurance mandates from the Senate bill, but people who get subsidies will continue to buy the insurance. There will be no savings for the government.

Other losses in deductions:

  • Alimony: No longer deductible for decrees after 2017.
  • College boosters: No longer deductible if for eligibility in buying seats at games or preferences such as prime parking places.
  • Employee achievement awards.
  • Employer-provided housing: A cap of $50,000 salary.
  • Home sale gains: Qualification requires the home to be the primary home for five of the past eight years instead of two of the past five years.
  • Office day care center.
  • Rare disease research.
  • Stadium bonds (DDT promised to do this to the NFL).

Winners:

REUTERS/Mike Segar TPX IMAGES OF THE DAY – RTSO7UI

  • Businesses because they receive three-fourths of the benefits.
  • Owners of jets and golf coursesThe savings on each of these are minimal compared to lost benefits, but it should keep Dictator Donald Trump (DDT) satisfied.
  • Churches that can campaign for political candidates.
  • Anti-abortion activists because people can name fetuses as beneficiaries of 529 college savings plans. The tax bill defines “child in utero” in personhood terms as “a member of the species of homo sapiens at any state of development, who is carried in the womb.” Law already covers the 529 accounts, but the bill throws the door open to making all abortion illegal.
  • Inheritors for 5,500 estates that drops not only tax on the estate but also on any capital gains on inherited taxes until they are sold.

House Speaker Paul Ryan (R-WI) tries to convince the people that the new plan is “fair” and “simple” because taxes can be filed on a postcard. Yet the card has no instructions on the card to explain what should be put in a line—i.e., what is a savings plan?—and even asks for the Social Security number to be put on the back of a card that gets put into the mail, available for anyone to see it. And people pay more taxes.

VP Mike Pence sounded sincere when he lied to a Wall Street CEO gathering. He claimed that workers could keep more of their money (false) and companies are incentivized to bring jobs back to the United States (false). Instead of eliminating loopholes, the tax bill leaves them only for the wealthy. According to Ivanka Trump, people can use their tax cuts to hire a tutor to teach their children the Mandarin Chinese language. Gary Cohn, DDT’s multi-millionaire economic advisor, cheerfully claimed that people can use their $1,000 in tax cuts for remodeling the kitchen or buying a new car.

Bruce Bartlett, an expert in supply-side economics serving under Presidents Reagan and George H.W. Bush, said, “There has never been a tax cut in American history in which taxes were raised on the poor to benefit the wealthy. I don’t know of any other country that has done anything remotely like this.” After 1986 tax cuts, wages fell for ten years. Most Republicans have no answer for the failure of tax cuts although Mulvaney tried to explain that the world is different now.

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.

According to a Quinnipiac poll, only 25 percent of people like the GOP tax plan, and only 16 percent think it will reduce their taxes. Thirty-five percent expect their taxes to increase. Only 24 percent say it will help the middle class the most, while 61 percent think that the wealthy benefits most.

This photo shows the GOP position toward tax cuts that take money away from most of the people to benefit the wealthy. The “King of Foreclosure” Treasury Secretary Steve Mnuchin and his ultra-wealthy wife admire new bills with his name emblazoned on it.

The Republicans have only one reason to destroy the U.S. economy with their tax cuts: get their donors back. If they don’t pass something, nobody will fund their campaigns. In their reality, better to pander to donors than help the hundreds of millions of people in the United States.

The Senate tax bill has differences from the House bill that may cause trouble when Congress returns next week. Three defectors to the tax bill will sink it. Here’s a partial score card of concerned senators:

  • Susan Collins (ME): She opposes dropping the health care mandate, the “biggest mistake,” because it causes insurance premiums to drastically rise.
  • Ron Johnson (WI): A conservative, he owns a small business and wants more perks for it. His demand will increase the deficit and take the amount into an area 60 instead of 50 votes.
  • Bob Corker (TN) and Jeff Flake (AZ): They don’t like the $1.5 trillion—or more—deficit.
  • Lisa Murkowski (AK): She also doesn’t like dropping the individual mandate but said that “one should not assume this is a precondition for my support for the tax bill.” She likes the Arctic oil drilling in the bill.
  • Rand Paul (KY): He might back out without the repeal of the individual mandate.

It’s all a crap shoot; in the meantime we have Thanksgiving.

1 Comment »

  1. When will we wise up and rise up?

    Like

    Comment by Lee Lynch — November 21, 2017 @ 10:01 PM | Reply


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