According
to news reports, Donald Trump wanted the House Republican tax “reform”
bill to be called the Cut Cut Cut Act. Alas, he didn’t get his wish, and
it was instead given a boring name nobody can remember. But there’s
still time to change it! So let me propose, as one reader suggested,
that it be renamed the Leona Helmsley Act, after the New York hotelier convicted of tax evasion, who famously declared that “only the little people pay taxes.”
That,
after all, is the main thrust of the bill. It hugely favors the wealthy
over the middle class, which is pretty much always true of Republican
proposals. But it’s not just about favoring high incomes: It also
systematically favors people who live off their assets, especially
inherited wealth, over the little people — that is, poor shlubs who
actually have to work for a living.
To get an idea why, consider four hypothetical taxpayers and how they would fare under the G.O.P. bill.
First
is the poster child family Paul Ryan keeps talking about, a family with
two children making $59,000 a year. In the first year of the Cut Cut
Cut Act, such a family would indeed receive a tax cut. But this cut
comes from several special tax credits that are basically loss leaders
to help sell the plan; they all either expire in later years or will get
eroded by inflation. By 2027, with the plan fully phased in, that
exemplary family would actually be facing a significant tax increase relative to current law.
Second,
consider someone who is much further up the scale, but still works for a
living. In the movie “Wall Street,” Gordon Gekko sneers at
“a $400,000-a-year working Wall Street stiff flying first class and
being comfortable.” What would happen to that guy? Well, I’ve done some back-of-the envelope calculations:
If you ignore deductions, he’d end up paying a few hundred dollars less
in taxes. But once you take lost deductions into account, especially
reduced deductions for state and local taxes, he almost certainly ends
up facing a tax hike, not a cut.
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And
of course it’s not just Wall Street stiffs who would find themselves in
that situation: So would doctors, lawyers, engineers, and other
well-paid professionals. Overall, the Tax Policy Center
estimates that more than a quarter of the population would see taxes go
up, not down, under the G.O.P. proposal; for those with incomes between
$200,000 and $500,000, that fraction rises to more than 40 percent.
But
what about owners of small businesses? Under current law, their
business income is “passed through” to their personal income, and taxed
accordingly. The Cut Cut Cut Act would instead allow people with such
income to pay only 25 percent, a big tax break for those with high
incomes. But this raises obvious possibilities for abuse, with every
well-paid professional reclassifying herself or himself as a business.
To limit these abuses, the G.O.P. bill imposes rules that basically limit the 25 percent rate
to “passive” income recipients. That is, you get the full tax break
only if you own a business but don’t, you know, actually run it.
Finally,
let’s imagine a very lucky individual — let’s arbitrarily call him Eric
Trump — who stands to inherit a stake in a business he doesn’t run,
plus a bunch of stock. He’ll get his inheritance tax-free, because the
estate tax gets phased out in the G.O.P. bill. He’ll get to pay a low
tax rate on his business income. And his stocks will pay higher
dividends, because the G.O.P. bill also sharply cuts corporate tax
rates, and most of the benefit of those cuts will probably flow to shareholders.
So when Gary Cohn, Trump’s top economic adviser, says that the bill’s goal
is “to deliver middle-class tax cuts to the hard-working families in
this country,” he’s claiming that up is down and black is white. This
bill does little or nothing for the middle class, and even among the
affluent it’s biased against those who work hard in favor of the idle
rich.
Also
let’s not forget that tax increases on working Americans are only part
of the story. This bill would also, according to the Congressional
Budget Office, add $1.7 trillion to the national debt
over the next decade. You know what that means: If this bill or
anything like it passes, Republicans will immediately revert to their
previous pretense of being deficit hawks and start demanding spending
cuts.
And
since federal spending is dominated by programs — Social Security,
Medicare and Medicaid — that benefit the middle and working classes, the
end result of this tax bill would be to leave most working Americans,
even those who wouldn’t face direct tax increases, worse off, all for
the benefit of a tiny minority, especially those who haven’t even worked
for their wealth.
You
might wonder how Republicans imagine that they can get away with this.
But anyone who has paid attention to U.S. politics knows the answer.
First, they will lie, unashamedly, about what their bill actually does.
Second, they will try to distract working-class voters by stoking racial
animosity. That didn’t work too well in Tuesday’s elections, but
they’ll keep on trying.
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