|President Donald Trump (Aaron Bernstein / Reuters)|
The bill reduces federal taxes by about 10 percent for the middle class, not the promised 35 percent, and only for eight years. What’s more, if the president was aiming to help the middle class, he missed wildly: Federal taxes as a percentage of income will go down most for the wealthiest.
And because the tax cuts for individuals expire after 2025, while the 40 percent reduction in the corporate income tax rate is forever, the end product will be a tax code significantly less progressive than today’s.
“It’s disgusting smash and grab. It’s an all-out looting of America, a wholesale robbery of the middle class,” House Democratic Leader Nancy Pelosi said at a Tuesday news conference. “The GOP tax scam will go down, again, as one of the worst, most scandalous acts of plutocracy in our history.”
White House Press Secretary Sarah Sanders on Tuesday insisted that the final bill is designed to primarily benefit typical Americans. “Our focus has been on the middle class, and that is what we think is delivered in this tax package,” she told reporters at the daily press briefing.
That claim, though, is belied by an analysis by the nonpartisan Tax Policy Center, which shows that a middle-class household with $67,000 of income will receive an average tax cut of $930 next year ― $77.50 per month – while a family with $348,000 of income will get an average tax cut of $7,640.
Senate Republicans, hoping to boost the bill, sent out of a chart showing that those earning between $200,000 and $1 million a year would actually get a larger percentage tax cut than households making between $50,000 and $200,000 ― essentially making the bill critics’ argument for them.
There were additional claims Trump and fellow Republicans made about the bill that wound up being untrue.
Trump has claimed multiple times that the proposal will make him pay more in taxes ― a claim that is almost certainly false. Rather, Trump and his family stand to benefit by millions of dollars thanks to lower top rates for the rich, as well as a big deduction for precisely the sort of businesses that Trump claims generated more than $200 million in income last year.
House Speaker Paul Ryan (R-Wis.) and Senate Majority Leader Mitch McConnell (R-Ky.), meanwhile, began their push for “tax reform” with statements that it would be revenue-neutral ― that is, that the changes would neither increase nor decrease the amount of money flowing into the Treasury.
“It will have to be revenue-neutral,” McConnell told Bloomberg in May. “We have a $21 trillion debt.”
But even using the “dynamic scoring” that tax-cut aficionados have pushed for years because it accounts for economic growth that cuts purportedly will generate, the Joint Committee on Taxation still sees more than $1 trillion in new debt at the end of 10 years. The Committee for a Responsible Federal Budget believes the figure could be twice that.
“This is a huge lost opportunity where we could’ve done real reforms that would simplify the tax code, grow the economy, and improve the debt,” said the group’s president, Maya MacGuineas. “Instead there was an end run around the actual reform part of broadening the tax base and getting rid of tax breaks.”
That enormous price tag is because of the reduction in corporate tax rates ― from a top rate of 35 percent down to 21 percent ― that never expires.
Republicans argue those cuts will give corporations more money they can use to invest in their businesses and hire more employees. But most economists reject that idea and point out that corporations have been sitting on trillions in cash for years, not investing it, because of a lack of demand for additional goods and services.
The prevalent economic view holds that the vast majority of money saved in taxes will be distributed instead as dividends to shareholders or used to buy back stock, which increases the value of the remaining shares. And because the wealthiest 10 percent of Americans own more than 90 percent of all stock, they will be the overwhelming beneficiaries of the corporate tax cuts.
Republican authors of the bill could not leave in place all of their tax cuts for more than 10 years because of Senate rules that would have required them to win over at least eight Democrats to pass a bill projected to generate a deficit in the 11thyear. Republicans leaders chose to make the corporate rate cuts permanent but “sunset” the tax cuts for individuals.
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