How awful are the GOP tax plans winding through Congress?
Let us count the ways.
Both the House and Senate bills would blow a $1.5 billion hole in the deficit with massive tax cuts, the lion’s share of which would go to the wealthiest Americans. According to the Tax Policy Center, the Senate tax bill would give wealthier households “larger average tax cuts as a percentage of after-tax income” and the largest cuts “as a share of income” would go those in the 95th to 99th percentiles.
While lower income taxpayers would initially see some benefits from the legislation, the Tax Policy Center estimates that by 2027, half of all taxpayers would see their taxes go up. At the same time, the top one percent will in that same year receive a tax break of $30,000 and the top 0.1 percent will get a boost of $200,000.
The House bill is only slightly less awful in this regard — just 24 percent of taxpayers would see their taxes go up in 2027.
Oh, and I haven’t even mentioned the estate tax cut, which will benefit literally the top 0.2 percent of taxpayers (including the president and many members of his Cabinet) at a cost of $151 billion
By contrast, a little over a third of that $150 billion could be used to set up an opioid crisis center in every county in America.
So these tax cuts not only reflect incredibly misplaced national priorities, they the opposite of Robin Hood: steal from the poor to give to the rich.
But there’s more!
The Senate bill would repeal Obamacare’s individual mandate, which will cause 13 million Americans to lose their health insurance and for millions of others will cause their health care premiums to rise.
The House bill would remove a $250 tax credit for teachers who buy school supplies for their students.
It would tax tuition waivers that are currently granted to graduate students and would, as a result, stick them with massive tax bills that could make graduate education prohibitively expensive for all but the wealthiest Americans.
Even the tax goodies for middle-class Americans come with a catch. The House tax bill would raise the child tax credit from $1,000 to $1,600 but would, according to the Center for Budget Priorities, “partially or entirely exclude more than 25 percent of children in working families” while at the same same time extend the credit to married couples with two children who make “between $150,000 and $294,000” a year.
Here’s the worst part: while Republicans have pitched these tax cuts as just the kind of boost that the economy needs the positive impact of the legislation will be minimal at best. According to one analysis by Goldman Sachs, which is not exactly a bastion of liberal wealth redistributionists, these tax cuts would lead to an increase of 0.1. to 0.2 percent in growth and 0.05 over 10 years. Others see virtually no increase in growth over the long-term.
Actually I take back what I just said. The worst part of the bill is something that few people are even focused on: the future impact on domestic spending.
Since the tax cut bill is not paid for and will add $1.5 trillion to the deficit, it will trigger Senate PAYGO rules that will lead to mandatory spending cuts. That means $150 billion in spending cuts per year for 10 years. According to Frank Clemente, the executive director of Americans for Tax Fairness, that would mean $28 billion in Medicare cuts in 2018, which will balloon to $56 billion by 2027.
And there would also be massive cuts to domestic spending programs. Now it’s entirely possible and even likely that Congress will vote to waive the PAYGO rules and not require these cuts to be made. Though one could certainly imagine Tea Party Republicans refusing to go along with such an effort.
But whatever happens there will be a serious and long-term effect on government spending. Money for new public investments like education, infrastructure, health care, or dealing with the impact of climate change would dry up. Even if the political will could be found to tackle these issues, borrowing costs will be that much greater because of the higher interest rates that will come from this legislation.
But the bigger consequence of the GOP’s tax bill will be political. Republicans like to argue that massive tax cuts pay for themselves through higher growth, but that never actually happens.
So inevitably, tax revenues will fall, the deficit will rise and then the calls will come from Republicans to trim the deficit. And how? Not by raising taxes, but by cutting spending. This is what happened after the massive Bush tax cuts of the 00s. Tax revenues went down, deficits increased, the economy grew sluggishly, at best, and the GOP didn’t care until Democrats took back Congress and the White House. At that point the party of blowing holes in the budget became the party of fiscal responsibility. In the Obama years, that meant a disastrous deficit reduction bill in 2011 and even worse, a refusal of Republicans in Congress to spend any money on new national investments. In the end, it was the huge Bush tax cuts that prevented new spending measures to grow the economy, create jobs and help the American people — but guess who paid the political price in 2010, 2014 and 2016?
If you don’t think that pattern will repeat itself after these latest round of tax cuts, I have a bridge in downtown Brooklyn that might interest you. For the GOP, cutting taxes isn’t just about making the rich richer and the poor poorer. It’s also about hamstringing the government (i.e. Democrats) to spend money on anything and in the process, reaping the political rewards. Of course, we know who pays the price for reduced government spending . . . it’s not the people who would be getting a massive tax cut under the GOP’s tax bills.
So as bad as the GOP tax cutting mania may seem on the surface, the real disaster of these bills awaits us years down the road. Every American should have their hair on fire about what will happen if the GOP’s tax cut becomes the law of the land.
Michael A. Cohen’s column appears regularly in the Globe. Follow him on Twitter @speechboy71.