To hear Trump proclaim it, it will be the “biggest tax cut in U.S. history.”
I don’t know how he managed to leave “amazing” out of the sentence but it is that too.
Trump was speaking of the still unveiled tax cut that he hopes to enact if he can hold his two vote Republican majority in line in the Senate.
The budget bill which passed by the Senate contains some pretty draconian cuts to Medicare and Medicaid and imperils those programs in the years to come.
Ignoring the fact that the baby boomer generation is retiring in increasing numbers and accessing Medicare, the budget plan would cut Medicare funding by four-hundred seventy-three billion dollars over the next ten years.
Add to that cuts in Medicaid funding over the same time period in the amount of one trillion dollars and you can see the pain that will be inflicted on the poor, children and seniors, particularly those confined to nursing homes.
Typically, an advanced and modern society provides for its elderly, particularly when they have worked all their lives and are expecting to enjoy the fruits of the programs that they have funded during their working years, but I guess we didn’t count on having Lewis Carroll in the White House.
On Thursday, the budget barely passed the House of Representatives as representatives from high tax states cringed at the prospect that the deduction for state and local taxes may be eliminated.
If one likes to read tea leaves to guess what will happen on this particular issue, the fact that House leaders canceled a meeting to discuss a compromise position, once they had secured the votes to pass the budget does not portend a favorable resolution of the deduction.
Another “revenue raiser” is the prospect that the deduction for 401-k retirement contributions may be scaled back.
While Trump contends that this last deduction will not be altered, House Ways and Means Committee Chairman, Kevin Brady and Senate Finance Committee Chair Orrin Hatch contend that they are not wedded to this position and open to changing the deduction.
Now that Trump and his Party have identified the 1.5 trillion dollars in spending cuts they need to finance his tax cut, they need to work out what the specific will be.
As usual, the devil is in the details.
The tax cut is generally predicated on the “Laffer Curve,” a theory that holds that if you cut taxes it will stimulate the economy and lead to more jobs which will produce more revenue.
It served as the basis for Reagan’s tax cut in 1986 and George W. Bush’s tax cut in 2000.
In practice, it has proven to have no more basis in reality than the theory that the world is actually flat.
Still, it gives the GOP talking points and allows them to proclaim that they are the champions of the middle class.
Trump and the GOP leaders seem wedded to cutting the corporate tax rate from thirty-five percent to twenty percent, reducing the number of tax brackets from seven to three and eliminating the estate tax and the alternative minimum tax.
How any of this benefits the middle class remains to be seen.
Tax experts that have examined these proposals have concluded that those in the top one percent earning $ 900,000 per year or more would see a tax cut averaging $ 234,050 in 2027.
Those in the middle class, making $ 50,000 to $90,000 would see a tax cut averaging $ 660.00 and one middle class house hold in four would be paying more taxes.
Another rationale for passing a tax cut in the guise of tax reform is the mantra that it will make the tax code simpler and allow people to file their tax returns on a “postcard.”
That usually means that they are going to simplify it by eliminating deductions, like the ones discussed above.
It’s also possible that they might cut taxes and make no unpopular changes to the deductions and blow a hole in the deficit.
That would, undoubtedly, enrage the “Freedom Caucus,” doom the whole “tax reform” effort and deny Trump, McConnell and Ryan the legislative “win” they so desperately crave.
I must say that I remain mystified by self-proclaimed deficit hawks who advocate tax cuts that will increase the deficit on the spurious claim that the demonstrably false Laffer curve will produce revenues that will cure this defect.
After watching the failed repeal of the Affordable Care Act, because its replacement was so unpopular, I am perplexed that Trump, McConnell, Ryan and company would wed themselves to an equally unpopular tax measure in the belief that it will provide them with a “win.”
My sense is that if the health care markets collapse and people lose coverage because Congress and Trump undermined them and suddenly find that they are paying more in taxes because Republicans wanted to post a win for the wealthy, retribution at the polls on Election Day 2018 will be coming.
At the same time, if you’re in the middle class and this legislation passes under the guise of “reform,” you might take solace in being able to file your tax return on a post card because a stamp is all you’re going to be able to afford.
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