“Our framework includes our explicit commitment that tax reform will protect low-income and middle-income households, not the wealthy and well-connected. They can call me all they want. It’s not going to help. I’m doing the right thing, and it’s not good for me. Believe me,” promised President Trump at a tax reform event in Indiana.
When Trump uses the phrase, “believe me,” it is almost always an indication that he is lying and he certainly is in every aspect of his promises about tax reform.
NBC News commissioned an analysis of how Donald Trump would fare under the House tax reform proposal. Based on information available from Trump’s 2005 tax return and using an estimated $2.86 billion net worth according to Bloomberg’s Billionaires Index, it was determined that: “In fact, Trump and his heirs could save more than $1 billion overall under the GOP tax proposal that the House of Representatives passed, with most of that amount coming from the repeal of the estate tax… Trump would save more than $20 million himself … and his heirs could potentially save $1.1 billion based on his reported wealth.”
An analysis by the nonpartisan congressional Joint Committee on Taxation found that under the proposed Senate bill, Americans earning less than $30,000 a year would pay higher taxes than they are currently paying beginning in 2021. This is because of a reduction in the subsidies that would accompany the repeal of the individual mandate under the Affordable Care Act. The total tax liability for this group would increase by about $6 billion in 2021. Americans earning less than $75,000 would also see large tax increases by 2027 because individual tax cuts expire at the end of 2025. By 2027, those workers would pay over $27 billion more a year while those making over $75,000 a year would see their taxes reduced by a combined $16 billion.
A new poll from the University of Chicago’s Booth School of Business asked top economists what they think of the Republican tax plan. Thirty-eight leading economists from Yale, MIT, Harvard, Princeton, Chicago, Stanford and the University of California-Berkeley were asked to respond to two questions:
“Question A: If the US enacts a tax bill similar to those currently moving through the House and Senate—and assuming no other changes in tax or spending policy - U.S. GDP will be substantially higher a decade from now than under the status quo.”
“Question B: If the U.S. enacts a tax bill similar to those currently moving through the House and Senate - and assuming no other changes in tax or spending policy - the U.S. debt-to-GDP ratio will be substantially higher a decade from now than under the status quo.”
On Question A, only 1 out of 38 economists agreed that Gross Domestic Product (GDP) would be substantially higher in ten years, but even that economist had reservations. Darrell Duffie of Stanford said: “A corporate tax reduction is likely to grow GDP. Whether the overall tax plan is distributionally fair is another matter.” In total on Question A: 36 percent were uncertain, 33 percent disagreed and 19 percent strongly disagreed. The remainder did not answer.
On Question B, the response was unanimous that the national debt would balloon under the Republican tax plans. In total on Question B: 43 percent agreed that the debt level would be substantially higher and another 45 percent strongly agreed. None disagreed but one economist was uncertain. That economist later changed his answer. Stanford’s Liran Einav told the Washington Post that he “didn’t read the question properly” and in fact agreed with the other economists.
These economists know that the old Republican argument that tax cuts will pay for themselves through economic growth is total nonsense. Robert Hall of Stanford said: “Spending is on a relentless increase relative to revenue. Within 10 years, the federal government will lose access to credit.” Larry Samuelson of Yale said: “The prospect of 5 percent GDP growth is absurdly unrealistic, and in its absence everyone agrees the proposed tax reform will contribute to debt.”
Every responsible analysis of the Republican tax plans, including the Joint Committee on Taxation and the nonpartisan Committee for a Responsible Federal Budget, show they will lead to huge deficits in the future. Even the right-leaning Tax Foundation found that the House bill would add $1 trillion to the debt over 10 years.
The United States Conference of Catholic Bishops recently sent a letter to the United States Senate that included their concerns for the poor and working families in relation to proposed tax reform. Here are some of the highlights from that letter:
“Care for the Poor. The Senate bill doubles the standard deduction, which will provide tax relief to many. However, the ‘Chairman’s Mark,’ as written, will raise income taxes on the working poor while simultaneously providing a large tax cut to the wealthy. The non-partisan Joint Committee on Taxation (JCT) reports that, on average, taxpayers making between $10,000 and $30,000 per year will see a tax increase in 2021, while millionaires get a tax cut the same year. In 2023 and 2025, average taxes will increase for those making less than $30,000, but they will go down for those making more than $30,000. By 2027, after most individual tax cuts are set to expire, average taxes will increase for taxpayers making less than $75,000, while decreasing for those making more. Tax breaks for the financially secure, including millionaires and billionaires, should not be made possible by increased taxes to families struggling to meet their daily needs.
The Senate proposal repeals one portion of the Affordable Care Act - the individual insurance mandate - apart from a needed comprehensive approach to health care reform, one that would protect against millions of additional people becoming uninsured and fix problems that pertain to affordability, protect unborn life, conscience and immigrant access. Tax reform should not become the vehicle for a partial health care reform that fails to address significant problems in our health care system while exacerbating other difficulties…
Progressivity of the Tax Code. Pope St. John XXIII wrote that a progressive tax code is required by ‘justice and equity.’ The ‘Unified Framework,’ upon which this tax plan was based, promised that any new tax code would be ‘at least’ as progressive as the present code. Like the House bill, this plan breaks that promise. The Chairman’s Mark raises taxes on the working poor, while simultaneously providing large tax breaks to high-income taxpayers. It eliminates the deductions for local property tax as well as state and local income and sales tax, which are often regressive in nature. It also doubles the limits for the estate tax (which currently applies to the estates of single people valued at more than $5.5 million and married couples valued greater than $11 million), and eliminates the Alternative Minimum Tax (AMT), which was designed to prevent high-income earners from avoiding tax liability through loopholes. In the years that the working poor suffer a tax increase under this bill, millionaires and billionaires will see significant tax decreases. This must change.
Adequate Revenue for the Common Good and Avoiding Future Cuts to Poverty Programs. The state has a legitimate role in promoting the common good, and a legitimate interest in collecting taxes to do so. This tax plan, by design, will result in a nearly $1.5 trillion deficit over ten years. Even with the potential benefits of economic growth from individual and corporate tax cuts - which cannot be guaranteed - the poor should not be the ones to finance these changes. On November 14, 2017, the Congressional Budget Office wrote that a deficit increase of $1.5 trillion over ten years would require spending cuts as early as 2018, if other legislation is not enacted. These cuts will almost certainly include deep reductions to programs that help those in need. The repeal of the AMT and the doubling of the estate tax limits make up a large portion of this 10-year deficit and only go to high-income households. The bill should be fixed so that the risks taken fall on those who stand to benefit most, rather than on those who struggle on the margins of society.”
Our two automaton Senators, Cotton and Boozman, enthusiastically support this dreadful tax legislation. In fact, to our shame, it was Cotton who initiated the idea to add the repeal of the individual mandate to the tax reform proposal. Cotton even had the unmitigated gall to act as though he was the protector of the poor, calling the individual mandate “a tax on working families and the poor.”
Poor people should not be deceived by Cotton’s words. This is a backdoor attempt to cut Medicaid and reduce insurance subsidies for working families. He has long championed cuts to programs that benefit the poor, like Medicaid and food stamps.
According to the Congressional Budget Office, repealing the individual mandate would increase the number of uninsured Americans by 13 million by 2027 and increase the average premiums in the nongroup market “by about 10 percent in most years of the decade.” Federal deficits would be reduced by about $338 billion during that time period. The deficit reduction would include $179 billion in Medicaid cuts and $185 billion in reduced subsidies for the nongroup market.
As the Catholic Bishops have recognized, these tax plans would truly harm the poor and benefit the rich on a massive scale. Trump has promised: “We’re working to give the American people a giant tax cut for Christmas. We are giving them a big, beautiful Christmas present in the form of a tremendous tax cut.” For poor working people, this Christmas present would be much worse than a lump of coal.