For once the President* found the precise word. The recently enacted tax bill is incredible, and so is the President*.
There are some elements of the tax plan which, indeed, are genuinely incredible. Here are a few —
The tax plan is predicated on what amounts to economic mythology/ideology, and it is NOT grounded in empirical evidence. Trickle Down economics is and has always been a theory in search of some evidence, and not a result of the collection and analysis of actual economic data. The following summation is as good a point at any to discuss the reality of this manufactured ideology:
“The harsh reality is that while this story has been told for – sometimes very eloquently for 30 years, now – we can look back to President Reagan’s tax cuts in 1981. There’s never been a documented case in which it actually worked. The problem is that every time we’ve enacted tax cuts in the last 30 years that have been based on this premise, we’ve had to backpedal as a nation. We’ve had to undo them. Sometimes, as in the case of the Bush tax cuts of 2001, it’s taken a decade of pitched battle for Congress to realize in a bipartisan way that they really had just dug the hole too deep.”
The tax plan benefits approximately 83% of the nation’s income earners, and does little to help the remainder.
“By 2027, more than half of all Americans — 53 percent — would pay more in taxes under the tax bill agreed to by House and Senate Republicans, a new analysis by the Tax Policy Center finds. That year, 82.8 percent of the bill’s benefit would go to the top 1 percent, up from 62.1 under the Senate bill.”
And even in the first years of the bill’s implementation, when it’s an across-the-board tax cut, the benefits of the law would be heavily concentrated among the upper-middle and upper-class Americans, with nearly two-thirds of the benefit going to the richest fifth of Americans in 2018.”
Let’s get realistic about this point. Nevada has a total population of 2,998,039; with a median home owner value of $191,600. The median household income is $53,094. The per capita income is $27,253. We’ve covered Nevada tax filers previously, with the following result:
1,350,730 Nevadans filed income tax returns in 2015. 27.21% of the Nevada filers reported adjusted gross income between $25,000 and $50,000. 13.5% of filers reported AGI between $50,000 and $75,000. 8.15% reported AGI between $75,000 and $100,000. Another 10.22% reported an AGI between $100,000 and $200,000. From this point on the percentage of filers by category drops, those reporting AGI between $200,000 and $500,000 were 2.48% of the filers; those reporting AGI between $500,000 and $1 million were 0.43%, and those reporting over $1 million AGI made up 0.26%.
It doesn’t take any form of complicated arithmetic to discover that giving tax breaks to the top tier income tax filers doesn’t apply to all that many people in the state of Nevada (or anywhere else for that matter.) While the definition of “middle class” seems to vary, the most commonly accepted definition by income asserts it is those households earning between $46,960 and $140,900 annually. Nevada’s median income ($53,094) fits within that range. The majority of the benefits included in the current tax scheme do NOT accrue to the majority of Nevada’s income tax filers.
And then there’s the CBO analysis:
“According to the CBO’s calculations, individuals in every tax bracket below $75,000 will experience a year in which they record a net loss — meaning they’ll pay more in taxes, experience diminished services, or both — by 2027. The lowest income groups will face significant overall losses, and those making between $10,000 and $20,000 a year will face the biggest losses. The CBO estimates that in 2027, taxpayers from this bracket will see an overall loss equivalent to $788.10.”
If ever there was an example of Reverse Robin Hood, this tax scheme would serve nicely. This is a middle class tax cut only if the middle class is defined in extremely illogical ways — as if $250,000 AGI was anywhere in the “middle.”
The tax plan make corporate tax cuts permanent and individual/family tax cuts temporary. This is a recipe for disaster in 2027 when someone is asked to pony up the difference between realistic spending and unrealistic assumptions about economic growth.
The tax plan is underpinned by the assumption corporate tax cuts will yield increased wages and increased employment. A common Republican argument of the moment is that our recovery from the last recession was sluggish, and tax cuts would have made it better. Another argument could as easily be made: The recovery was not as robust as it could have been because Republicans refused to enact the kinds of stimulus spending that would have both improved our national infrastructure and boosted consumer expenditures. Republicans screamed “deficit spending” and “national debt” to the heavens, a tune they now seem to have forgotten as they vote in favor of a $1.4 trillion deficit.
The tax scheme also ignore the obvious. How many times in this modest little blog have we said: There is ONE and ONLY ONE reason for any firm to hire anyone at any time — a business only hires personnel when the staffing levels are insufficient to meet the demand for goods or services with an acceptable level of customer/client satisfaction. Regular readers should be able to recite this from memory by now.
We’ve also mused about other ways corporations spend their windfalls — mergers and acquisitions, increased dividends, stock buy-backs, increased investment in financial revenue streams, etc. It’s not like wage increases and plant expansion are the only options. In fact, for corporations, especially those for whom ‘shareholder value” is the driving focus, increasing wages and capital expenditures is the last likely option. Shareholders are focused on getting a maximum return on their investments and this is not enhanced by increasing labor costs.
The tax plan is riddled with benefits for the wealthy that defy common sense. For example: Carried interest, increasing the estate tax exemption (Fun Fact: Of the 5,460 estates slated to pay the estate tax this year only 80 of them are small businesses or farms.) More examples? There’s the alternative minimum tax which was enacted to address a concern which may be resurrected by this tax bill:
“Congress enacted the AMT in 1969 amid widespread outrage that many wealthy people paid little or nothing to Washington thanks to clever use of loopholes. But because income thresholds for being subject to the tax weren’t indexed to inflation (until 2012, which didn’t make up for the decades of lost ground), many middle-class people got sucked into paying it. ”
The tax plan is only part of an overall plan to Kill The Beast. Or, make government so small it could be drowned in a bathtub? Those who aren’t convinced by now that the next move by this Norquistian Congress is to go after Social Security, Medicare, and Medicaid haven’t been listening to GOP leadership. Expect the drumbeat of commentary on “entitlements” to increase by leaps and bounds — We have a Huge Deficit! (Which they created) and now We have to cut government spending. Remember: They are called entitlements because you are entitled to the benefits you’ve been paying for with your payroll taxes all along.
Pro Tip: This assessment of voters was made in 2006, and not all that much has changed since –
“Regular voters also are older than those who are not registered. More than four-in-ten of those ages 50 and older (42%) are regular voters, about double the proportion of 18-29 year-olds (22%). Among those between the ages of 30 and 49, more than a third (35%) reliably go to the polls a fact that is consistent with previous research that found voting is a habit acquired with age.”
Now, who is most likely to be quite concerned with saving Social Security and Medicare? There’s a reason Social Security and Medicare form the third rail of American politics.
A final point. The Republicans have given away their cards. When Democrats called for increased spending on health programs, Republicans pointed to the deficit. When Democrats called for increased infrastructure spending, Republicans pointed to the deficit. Now, the deficit (all $1.4 trillion of it) is the responsibility of the Republicans. They’ve given away the revenue. Now the Democrats have the Tax the Corporations card in hand. And who among the GOP wants to run on a platform of saving those cash-hoarding multi-national corporations? Good luck with that.