It is barely an exaggeration to say that Republican Party leaders have stretched the fabric of American democracy to its breaking point for the privilege of cutting their donors’ taxes.
Now they intend to compound the damage by exacerbating economic inequality, by offsetting the enormous cost of those donor-class tax cuts with tax increases for tens of millions of American workers, and higher health care premiums—or lost insurance—for millions more.
The central challenge facing Republican legislators who want to reward their donors with enormous, permanent business tax cuts is to construct a bill that, on paper, will not increase the deficit after the budget window closes 10 years from now. The central challenge facing the rest of us is to recognize that the way they plan to do this breaks faith with the public just as did their misbegotten health care repeal bills, which the public rejected as morally unacceptable.
Senate budget rules say that tax code reforms can only be fast tracked and exempted from filibusters if they don’t increase deficits in the long run.
Under President George W. Bush, Republicans worked around these rules by passing multiple giant income tax cut bonanzas, but writing their bills to expire abruptly after 10 years.
That’s much harder to do on the business side, because corporations can strategically time their tax liabilities. Temporary tax cuts incentivize them to pay more tax now to avoid higher rates in the future. The fiscal effects of temporary corporate tax cuts are thus detectable way past the point of expiration. Thy increase deficits on the long run even if they’re temporary.
To escape that conundrum, Republicans have decided that the donor-class tax cuts must be permanent, which is a huge boon to the donors, but has required Republicans to seek permanent offsets—ones that eclipse the cost of corporate tax cuts more than a decade into the future.
What they’ve settled upon is the idea that tens of millions of poor and working people should pay for these permanent corporate tax cuts in the form of higher income taxes payments, and less health insurance.
Republicans spent the first eight months of Trump’s presidency trying to funnel the money that pays for poor and working people’s health care into the pockets of rich people. Now they have moved on to the radically different challenge of lining the pockets of rich people with the money that pays for poor and working people’s health care.
The Senate tax bill contains myriad provisions, but this is an essential long-term trade off at the heart of it.
Repealing the individual mandate, Senate Majority Leader Mitch McConnell explained to a room full of CEOs, “would raise $330 billion over the next 10 years [which] would provide us, for example, the opportunity … to make permanent the corporate tax rate.”
But repealing the mandate only raises as much money as it does because it would cause 13 million people to lose, or withdraw from, their individual market health plans and Medicaid, both of which are federally subsidized.
Republicans also want to index tax bracket thresholds to a slower-rising measure of inflation, meaning the system will capture more and more labor income over time.
That’s what’s permanent.
Essentially all the other goodies Republicans stuffed into the plan to provide them cover to call it a middle-class tax cut will expire after 10 years. This means tens of millions of people will see a tax increase immediately, and tens of millions more will be threatened with a tax increase (in some cases a very big tax increase) 10 years from now.
As a result, about 57% of all filers are worse off in 2027 under the modification versus the original Senate TCJA, as written. In some income groups, like the $50K-$75K band, it’s close to 80%. /7 pic.twitter.com/NfRuZIZp7N
— Ernie Tedeschi ? (@ernietedeschi) November 15, 2017
Even with the corporate tax cut effects added in, about 38% of filers face a tax hike in 2027 versus current law. Without the corporate cuts, that rises to 72%. /18 pic.twitter.com/vFnGyC8ZHn
— Ernie Tedeschi ? (@ernietedeschi) November 15, 2017
Parents continue to do worse under the Senate bill than all filers at large. 17% of parents get a hike in 2018 versus current law, versus 11% of all filers. Almost half of parents in the $30K-$40K range get a hike in 2018. /22 pic.twitter.com/l9mbyRBev7
— Ernie Tedeschi ? (@ernietedeschi) November 15, 2017
As you might expect, it’s even worse in 2027. 47% of parents get a hike versus current law, while for all filers it’s 38%. 70% of parents between $10K-$50K get a tax hike in 2027 /23 pic.twitter.com/YFtsnOWK5z
— Ernie Tedeschi ? (@ernietedeschi) November 15, 2017
The good news is that after an anxious 24 hours, cracks are emerging in the GOP facade. On Tuesday, Sen. John Thune (R-SD), who is a member of the Republican leadership team, said 50 senators stood in support of the plan, which he claimed had already been whipped. By Wednesday night, that seemed less like a factual statement and more like a clumsy attempt to make majority support for the bill a self-fulfilling prophecy.
Sen. Ron Johnson (R-WI) said he does not support the bill in its current form—he wants it to be more of a giveaway to rich business owners. Sen. Susan Collins (R-ME) expressed strong reservations about the distributional consequences of making middle-class people pay higher premiums, without giving them equal or more offsetting tax cuts. Sens. John McCain (R-AZ) and Bob Corker (R-TN) both said they couldn’t take a position on the bill, because the bill keeps changing. Like the Republican health care bill, the Republican tax bill enjoys the support of less than 30 percent of the public.
The bill is vulnerable, but for now its greatest asset is the fact that most people don’t recognize it as the deformed sibling of a bill they’ve already mobilized multiple times to defeat.
