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How the GOP/Trump Tax Bill Rips Off the Poor to Enrich the Wealthy.
11/07/17
OVERVIEW
The 429 page bill is a massive and complex piece of legislation. Because it was developed in secrecy and has had no mark-ups or public input it will certainly undergo many changes as the public begins to appreciate the impact and as lobbyists go to work. It is not clear if the House and the Senate can come together on a unified bill to become law. The plan is to cram this bill through the House before those in opposition can express their concerns to their Members of Congress. Regardless the main thrust of the bill will remain the same.
Despite the President’s assertions this is not the biggest tax cut in history. If it reduces federal taxes by $1.5 trillion, as promised, it would be about the 7th or 8th biggest tax cut in modern history. As a share of the economy, it would cut taxes by less than 1 percent of GDP compared to the Reagan-era 1981 tax bill that cut taxes by more than three-times as much—2.89 percent of GDP.
For most Americans, the proposed tax cuts are tiny and temporary, that is, they will shrink away in a few years. Some middle class Americans will actually get a tax increase.
Based on estimates recently released by the Joint Committee on Taxation the individual tax provisions in the GOP bill actually raise taxes by about $385 billion over the next ten years after setting aside the repeal of the estate tax, the lowering of the top tax rate for pass-through business income, and the repeal of the Alternative Minimum Tax – none of which provide any significant tax relief for middle-income families.
Meanwhile, the top 1 percent will get a gigantic permanent tax cut. The Tax Policy Center estimates that the current plan will save the bottom 80 percent between $50 and $450 in taxes per year, but that it saves each person in the top 1 percent an average of $129,000 a year. For people at the very top, like Trump himself, the tax cuts are humongous especially wealthy heirs, while opening vast new opportunities for tax avoidance. The corporations they own will also get a massive permanent tax cut equaling almost 70 percent of the total tax cuts.
These tax breaks are based on the Republican budget which cut critical expenditures for families of working and retired Americans: $470 billion from Medicare, and $1.3 trillion from Medicaid and other health care programs over the next 10 years, plus trillions more stolen from everything from nutrition assistance to education and job training programs.
After years of hysterical demands to cut the deficit by Republican deficit hawks this tax bill will explode the deficit over the coming years.
The top 1 percent has seen income growth of 160 percent since 1979. The top 1 percent doesn’t need a tax cut. Measured as a share of total GDP, U.S. corporations pay significantly less than their international peers. In 2015, the revenue raised through U.S. corporate taxes equaled 2.2 percent of GDP. On average, other member countries of the Organization for Economic Cooperation and Development (OECD) raised 2.9 percent of GDP through corporate taxes. U.S. corporations do not need a tax cut to be competitive with their peers.
If the Congress wanted to give middle income families a tax cut it would be simple: cut income tax rates for middle-class workers and/or double the personal exemption. Republicans and President Trump chose not to do this and that is not the intent of this tax bill.
Meanwhile President Trump made known that he intends to make David Kautter acting commissioner of the IRS on November 12th, when the current director's term ends. The IRS's job is enforcing the tax code. Mr. Kautter has zero experience at the IRS and in tax enforcement. His his experience is as the director of "National Tax" at E&Y, the huge accounting firm formerly known as Ernst & Young where he specialized in helping clients avoid paying taxes.
SALT (State and Local Tax Deduction)
The partial elimination of SALT – combined with cutting the cap on the mortgage interest deduction in half – will result in a double whammy on homeowners, raising tax bills while diminishing home values. The plan also will result in a backdoor hit to every taxpayer around the country, as it threatens essential public services, such as education, healthcare and infrastructure, that are substantially funded through state income and sales taxes.
Personal income and sales taxes supply two-thirds of all state revenues. Contrary to claims that high state and local tax states are being subsidized by low state and local tax states, multiple studies show that most states that are considered to be a “net donor” — those that pay more in taxes than they get back from Washington — also benefit the most from the state and local tax deduction.
The plan creates an unprecedented double standard by eliminating the income tax deduction for individuals and families while preserving the same deduction for corporations.
LOW INCOME FAMILIES
Early projections suggest the bill would cut taxes for an average middle-class family. But the typical cut could be relatively modest, compared with the benefits for businesses and high earners. More important, the myriad changes in the code would actually raise taxes on nearly 13 million tax filers who earn $100,000 a year or less, according to preliminary calculations using the open-source economic modeling software TaxBrain.
Tax breaks such as the new family credit would expire after five years.
Income tax bracket levels (and in this bill the first $1,000 of the $1,600 child tax credit) are indexed for inflation using the Consumer Price Index to prevent filers from creeping into higher tax brackets. The standard deduction is also adjusted for inflation so it does not lose its value over time. The bill calls for a different measure of inflation, called chained C.P.I., to calculate these increases. C.P.I. is a slower growing measure of inflation, so the change would result in a tax increase over the long run.
The House GOP plan scraps a tax break that allowed teachers to deduct up to $250 in out-of-pocket expenses for the classroom.
The bottom half of taxpayers now pay no net income tax, according to Treasury Department figures but this plan will create possible delays and complexity for EITC taxpayer refunds.
The Republican tax bill eliminates the adoption tax credit, which exists to help reduce financial barriers to adoption. The credit essentially helps subsidize costs — sometimes in the tens of thousands for private or international adoptions — for agency and attorney fees, travel, and post-adoption services, such as retrofitting a home for a child with special needs.
NON-PROFITS
The bill maintains the deduction for charitable contributions. However, the number of people who would claim the deduction would be sharply reduced, since the measure also nearly doubles the standard deduction.
ANTI-ABORTION
Buried on page 93 of the 429-page tax proposal is a provision that would allow fetuses to be named as beneficiaries of college savings accounts known as 529 plans ? investment vehicles that come with a range of tax breaks. It takes care to define the terms “unborn child” and “child in utero,” in what appears to be a naked attempt to establish so-called personhood for fetuses, a popular anti-abortion tactic.
There’s nothing in current law stopping parents from opening a 529 savings account before a child is born. A parent opens the account in his or her own name, and once the baby is born, changes the account beneficiary.How the GOP/Trump tax bill rips off the poor to enrich the wealthy.
OVERVIEW
The 429 page bill is a massive and complex piece of legislation. Because it was developed in secrecy and has had no mark-ups or public input it will certainly undergo many changes as the public begins to appreciate the impact and as lobbyists go to work. It is not clear if the House and the Senate can come together on a unified bill to become law. The plan is to cram this bill through the House before those in opposition can express their concerns to their Members of Congress. Regardless the main thrust of the bill will remain the same.
Despite the President’s assertions this is not the biggest tax cut in history. If it reduces federal taxes by $1.5 trillion, as promised, it would be about the 7th or 8th biggest tax cut in modern history. As a share of the economy, it would cut taxes by less than 1 percent of GDP compared to the Reagan-era 1981 tax bill that cut taxes by more than three-times as much—2.89 percent of GDP.
For most Americans, the proposed tax cuts are tiny and temporary, that is, they will shrink away in a few years. Some middle class Americans will actually get a tax increase.
Based on estimates recently released by the Joint Committee on Taxation the individual tax provisions in the GOP bill actually raise taxes by about $385 billion over the next ten years after setting aside the repeal of the estate tax, the lowering of the top tax rate for pass-through business income, and the repeal of the Alternative Minimum Tax – none of which provide any significant tax relief for middle-income families.
Meanwhile, the top 1 percent will get a gigantic permanent tax cut. The Tax Policy Center estimates that the current plan will save the bottom 80 percent between $50 and $450 in taxes per year, but that it saves each person in the top 1 percent an average of $129,000 a year. For people at the very top, like Trump himself, the tax cuts are humongous especially wealthy heirs, while opening vast new opportunities for tax avoidance. The corporations they own will also get a massive permanent tax cut equaling almost 70 percent of the total tax cuts.
These tax breaks are based on the Republican budget which cut critical expenditures for families of working and retired Americans: $470 billion from Medicare, and $1.3 trillion from Medicaid and other health care programs over the next 10 years, plus trillions more stolen from everything from nutrition assistance to education and job training programs.
After years of hysterical demands to cut the deficit by Republican deficit hawks this tax bill will explode the deficit over the coming years.
The top 1 percent has seen income growth of 160 percent since 1979. The top 1 percent doesn’t need a tax cut. Measured as a share of total GDP, U.S. corporations pay significantly less than their international peers. In 2015, the revenue raised through U.S. corporate taxes equaled 2.2 percent of GDP. On average, other member countries of the Organization for Economic Cooperation and Development (OECD) raised 2.9 percent of GDP through corporate taxes. U.S. corporations do not need a tax cut to be competitive with their peers.
If the Congress wanted to give middle income families a tax cut it would be simple: cut income tax rates for middle-class workers and/or double the personal exemption. Republicans and President Trump chose not to do this and that is not the intent of this tax bill.
Meanwhile President Trump made known that he intends to make David Kautter acting commissioner of the IRS on November 12th, when the current director's term ends. The IRS's job is enforcing the tax code. Mr. Kautter has zero experience at the IRS and in tax enforcement. His his experience is as the director of "National Tax" at E&Y, the huge accounting firm formerly known as Ernst & Young where he specialized in helping clients avoid paying taxes.
SALT
The partial elimination of SALT – combined with cutting the cap on the mortgage interest deduction in half – will result in a double whammy on homeowners, raising tax bills while diminishing home values. The plan also will result in a backdoor hit to every taxpayer around the country, as it threatens essential public services, such as education, healthcare and infrastructure, that are substantially funded through state income and sales taxes.
Personal income and sales taxes supply two-thirds of all state revenues. Contrary to claims that high state and local tax states are being subsidized by low state and local tax states, multiple studies show that most states that are considered to be a “net donor” — those that pay more in taxes than they get back from Washington — also benefit the most from the state and local tax deduction.
The plan creates an unprecedented double standard by eliminating the income tax deduction for individuals and families while preserving the same deduction for corporations.
LOW INCOME FAMILIES
Early projections suggest the bill would cut taxes for an average middle-class family. But the typical cut could be relatively modest, compared with the benefits for businesses and high earners. More important, the myriad changes in the code would actually raise taxes on nearly 13 million tax filers who earn $100,000 a year or less, according to preliminary calculations using the open-source economic modeling software TaxBrain.
Tax breaks such as the new family credit would expire after five years.
Income tax bracket levels (and in this bill the first $1,000 of the $1,600 child tax credit) are indexed for inflation using the Consumer Price Index to prevent filers from creeping into higher tax brackets. The standard deduction is also adjusted for inflation so it does not lose its value over time. The bill calls for a different measure of inflation, called chained C.P.I., to calculate these increases. C.P.I. is a slower growing measure of inflation, so the change would result in a tax increase over the long run.
The House GOP plan scraps a tax break that allowed teachers to deduct up to $250 in out-of-pocket expenses for the classroom.
The bottom half of taxpayers now pay no net income tax, according to Treasury Department figures but this plan will create possible delays and complexity for EITC taxpayer refunds.
The Republican tax bill eliminates the adoption tax credit, which exists to help reduce financial barriers to adoption. The credit essentially helps subsidize costs — sometimes in the tens of thousands for private or international adoptions — for agency and attorney fees, travel, and post-adoption services, such as retrofitting a home for a child with special needs.
NON-PROFITS
The bill maintains the deduction for charitable contributions. However, the number of people who would claim the deduction would be sharply reduced, since the measure also nearly doubles the standard deduction.
ANTI-ABORTION
Buried on page 93 of the 429-page tax proposal is a provision that would allow fetuses to be named as beneficiaries of college savings accounts known as 529 plans ? investment vehicles that come with a range of tax breaks. It takes care to define the terms “unborn child” and “child in utero,” in what appears to be a naked attempt to establish so-called personhood for fetuses, a popular anti-abortion tactic.
There’s nothing in current law stopping parents from opening a 529 savings account before a child is born. A parent opens the account in his or her own name, and once the baby is born, changes the account beneficiary.
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