That theory is going to be put to the test, and I’m pretty sure it’s going to be proven wrong. That’s because this bill won’t just fail to deliver on its promise of riches trickling down to everyone; it’s actually going to be a disaster for millions of Americans. And there’s not going to be any doubt about who inflicted it on them.
Remarkably, as this process goes along the bill keeps getting worse and worse. The latest change is that in the Senate, they’ve decided to toss in a repeal of the Affordable Care Act’s individual mandate, because that will give them more money to work with so they can make the math add up.
The new plan is meant to deal with two critical constraints. The first is that the budget resolution the Senate passed allows this bill to increase the deficit by no more than $1.5 trillion over the next 10 years. The second is that the bill can’t increase the deficit at all in the 10 years following that. They need to repeal the mandate because doing so gives them $338 billion in savings to work with, according to the Congressional Budget Office.
But the CBO also says that repealing the mandate will result in 13 million fewer Americans with health insurance — hence those savings, which won’t be spent on expanded coverage — and increases in premiums of an additional 10 percent a year. Some people won’t realize that they’re eligible for free or heavily subsidized insurance and, without the mandate to prod them, won’t get it, and as young and healthy people pull out of the market, the remaining pool will be older and sicker, leading to premium spikes, the exit of insurers from the market, and a potential “death spiral.” There are some Republicans, including the president of the United States, who are actually dumb enough to think voters will blame Barack Obama for this.
But that’s just one element of this tax cut that is going to be incredibly unpopular. Remember that point about not being able to increase the deficit at all after 10 years? Because they want to make the corporate tax cut permanent — since it’s the real centerpiece of this whole effort — here’s what they’re going to do:
[Senate Republicans] also announced that the individual tax cuts in the plan would be made temporary, expiring at the end of 2025 to comply with Senate rules limiting the impact of legislation on the long-term deficit. A corporate tax cut, reducing the rate from 35 to 20 percent, would be left permanent.
In other words, if you happen to be one of the lucky people who come out ahead at first with all the complex changes to the tax code this bill makes, in 2026 your taxes will go up. It’s just getting better and better, isn’t it? So let’s review:
- The Republican tax bill raises taxes on somewhere between 16 million (Senate version) and 47 million (House version) American households; the difference is mostly because the Senate bill doesn’t get rid of as many deductions as the House bill.
- Most of the benefits of the tax bill go to the wealthy and corporations.
- It may raise taxes on people with large medical expenses, and parents who adopt children, and people with student loans, and graduate students (these provisions are in the House bill, which ends these deductions, but not the Senate bill).
- It raises taxes on people who live in states with significant state and local taxes, because it does away with this deduction (in both versions).
- Because it eliminates personal exemptions, it raises taxes on many families with multiple children (in both versions).
- It will increase insurance premiums and lead to 13 million fewer Americans with health coverage.
- It could trigger a $25 billion cut to Medicare because of existing budget rules.
If you had to sum it up simply — for instance, if you were writing a Democratic attack ad in the 2018 election — you could say that Republicans are raising taxes on millions of Americans and taking away health insurance from millions more, all to pay for a huge giveaway to corporations.
Of course, Republicans argue that giving corporations a tax cut will make us all enormously richer. This claim is laughable, since corporations are already earning near-record profits and unemployment is low; it’s not as though they’re starving for cash and once they get this tax cut they’ll rush to invest, create jobs and raise wages.
We now have a vivid illustration of this fact. Gary Cohn, President Trump’s chief economic adviser, was at a forum, and the moderator asked how many of the business leaders in the audience planned to increase investment if the tax reform bill passed. Only a couple of hands went up. Cohn said with a pained smile: “Why aren’t the other hands up?”
If we’re considering the politics of this bill, it’s also important to understand that very few people buy the Republican argument. In fact, most Americans think corporate taxes should be raised, not lowered. So not only are the details politically damaging, but also the core of the bill is something the public doesn’t want.
None of this means the bill won’t pass. Republicans have convinced themselves that no matter how bad the bill is, not passing anything is worse, so the chances that they’ll allow it to fail are small. But when that day comes, Democrats will know that Republicans just gave them yet another powerful issue to run on in 2018. Expect to hear them say, “Republicans have had complete control of Washington for the past two years — and all they did was raise your taxes and yank millions from health coverage so they could lard another giveaway on corporations.” Something tells me that might be a pretty effective message.