Sunday, October 1, 2017

Forbes writer- GOP has already screwed up "tax reform" in Congress

Wanted to go a bit further on the US ""tax reform" package that will be sure to be an item of great discussion in the coming months. I encourage you to take a look at this article from Forbes' magazine contributor and Georgetown professor Stan Collender, who is a must-read on subjects of Federal taxes and budget (his Twitter Feed of TheBudgetGuy is also a good follow)

As Collender notes, there is no real economic reason for a taxes to be cut, since the Obama Recovery of the last 8 years has left the country with steady growth and near-full employment.
One of the key reasons is that no one has yet made a convincing case that this tax cut is needed to help the economy. With unemployment already low and GDP growth now approaching 3 percent, the kind of demand for a federal government-provided stimulus that would exist if there were a downturn or recession just doesn't exist. (Jake's note- I'd disagree on the growth part. I think we're still in the same 2% growth we've been in for the last few years. But we're also not in any kind of major slowdown...yet)

This lack of an economic imperative is extremely important for how the proposed tax cut will be treated politically. Trump and his allies on Capital Hill seem to be assuming that skeptical Republicans and at least some Democrats will agree to a bill that hurts voters in their district or state because he says a tax cut is needed to goose the economy. With that pretext removed, the parochial reelection concerns of each representative and senator rather than an amorphous appeal to "the economy" will be the primary consideration and even Republican support cannot be taken for granted.
In fact, I'd go the other direction and argue that a tax cut so heavily slanted to the rich and to corporations will make the biggest problem in our economy - low wages by everyday workers - even worse. As we've seen over the last 40 years, lower taxes on the rich and corporate encourage even more profit-hoarding and gambling on Wall Street, at least until the Federal Reserve has to raise interest rates to stop the cocaine party and causes asset bubbles to pop. I can't think that those blue-collars who voted for Trump to "drain the swamp" and see their dead-end lives improve are going to like seeing the nation's crippling inequality get even worse.

In addition, with a budget deficit likely to end up around $700 billion for the 2017 Fiscal Year, a tax cut along with the added costs of rebuilding from storms and other needs is going to turn that figure even higher. If the GOPs who cried crocodile tears about "$20 trillion debt" are legitimately concerned about owing even more, it's going to be very hard to get them to go along with such a tax cut without major decreases in spending- spending cut proposals that were a big reason behind the rejection of the GOP's prior attempts to get rid of Obamacare.

So what are the Trumps and the Ryans trying to say in order for this regressive pile to pass? They bring back the same voodoo BS that hasn't been true for my entire 43-year-old lifetime, where somehow there will be an economic boom which doesn't cause the deficit to blow wide open. Collender doesn't think this will fly.
This claim of rapid and steep GDP growth is also critical for the White House's insistence that, in the face of all credible evidence to the contrary, its tax cut will not increase the budget deficit or national debt. But by the end of last week, others with far more veracity on the federal budget than the Trump administration were reporting that the tax cut would spike the deficit and debt by between $2.2 trillion and $2.4 trillion over the next 10 years. Even the budget resolution produced last week by the GOP-controlled Senate Budget Committee to accelerate the debate on the Trump tax cut assumed it would increase the deficit by $1.5 trillion.

A deficit and debt increase of this magnitude proposed by Democrats would have immediately sent congressional Republicans into a tweet storm frenzy and been the prime topic on Fox News this weekend. But because it came from Trump, the impact of the deficit/debt increase will be far more subtle; a few GOP representatives and senators who are opposed to the tax cut for other reasons will use it to justify their opposition.

That will be a big problem for the Republican House and Senate leadership. While they say they expect that some Democrats will support the tax cut, the decision to exclude them from the planning process -- the Big Six consisted of four congressional Republicans and two members of the Trump administration -- means that it is anything but bipartisan. Because of that, and given the lack of any economic imperative and the substantive problems with the proposed tax cut (especially that it would harm taxpayers in blue states), House and Senate Democrats are far less likely to support the plan in its current incarnation than Trump, Ryan and McConnell are hoping.
Funny how the GOP mentality of "we have a slight majority so fuck the rest of you" continues to bite them in the backside when it comes to trying to get anything done other than autocratic power grabs.

And good luck selling this tax package when it will likely raise the taxes on a lot of the middle and upper middle-class homeowners in the burbs due to the end of the SALT (state and local taxes) deduction. These suburba-GOPs have looked the other way at the racism and the regressive fundie BS because they still cling to a mistaken 1980s-era belief that Republicans improve the economy and lower their taxes. If they haven't already jumped off the Trump Train, raising their taxes and stagnating the economy would likely do the trick for enough of them (and fire up casual onlookers who lean Dem).

That would be another reason to expect a flip in the House in 2018 and the loss of a lot of governorships (and 2020 gerrymandering) in purple states like Wisconsin. So please GOPs, use your remaining political capital on this "tax reform" garbage. If this absurd plan somehow becomes law, there won't be enough Koch money in the world to convince the average dope they aren't being screwed and that the benefits of their hard work are being funneled away to idle, rich a-holes.

As for the Dems at the Capitol, their strategy should be simple.

1. The only "tax reform" package that gets any votes is one that forces millionaires to pay the same tax rate into Social Security as the average working stiff. Currently everyone making over $127,200 gets a back-door tax cut from this provision, with the richest Amercians getting the biggest benefit. Not only would "scrapping the cap" shore up Social Security for the next several decades (and possibly allow for it to be expanded to people 55 and over, which would be a major benefit to the economy and peoples' well-being), but it increases tax fairness on the income tax that Americans are most likely to pay.

2. No votes to allow anything to proceed until we see Trump's taxes for the last 10 years. It only seems fair to make sure this guy isn't self-dealing before he gets to sign anything. I'm sure all you "good-government" conservatives would agree.


  1. Agree with most of what you're saying. Tax cuts to the rich and corporations do not create jobs, it's been shown time and time again. I advocate much more progressive taxation (without ways out of it), which is polar opposite to what right-wingers want.

    Since the meltdown of pre-2010, our "recovery" has been weak, and Dodd-Frank did little to remedy the problem. Why do both parties continue in this path? Look at Labor Department statistics, and our parties use "low unemployment" as a measure of success, while it ignores the larger problem of underemployment and people that are so disheartened that they didn't look for full-time work in the last 30 days--certainly does not give you an accurate picture of people and their circumstances.

    And yes, viewing Trump's taxes are not verboten, just as any other individual or corporation should not be.

    1. U-6 (which reflects the people limited to part-time work) also has declined nicely over the last 7 years, but it's still not all it could be. I think the bigger problem from that side is stagnant wages and crappier benefits, which is a side effect of the incentives we have in the current code that favor the rich.

      I also think more progressive taxation is the way to go here, and nothing should get passed until we know exactly how Trump might benefit.