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| You Cannot Be Too Cynical About the Republican Tax Bill | You Cannot Be Too Cynical About the Republican Tax Bill |
| (about 2 hours later) | |
| The rush to enact the tax bill was designed to mask — as a break for the middle class — what is in fact a $1.4 trillion package of benefits for key donors and lobbyists, the richest members of Congress, President Trump, his family and other families like his. | The rush to enact the tax bill was designed to mask — as a break for the middle class — what is in fact a $1.4 trillion package of benefits for key donors and lobbyists, the richest members of Congress, President Trump, his family and other families like his. |
| The speed from introduction to passage — seven weeks, with no substantive hearings — effectively precluded expert examination of the legislation’s regressive core, its special interest provisions and the long-term penalties it imposes on the working poor and middle class through the use of an alternative measure of inflation — the “chained CPI.” | The speed from introduction to passage — seven weeks, with no substantive hearings — effectively precluded expert examination of the legislation’s regressive core, its special interest provisions and the long-term penalties it imposes on the working poor and middle class through the use of an alternative measure of inflation — the “chained CPI.” |
| Only last Friday, when the legislation came out of conference committee and was no longer subject to amendment — and when decisive majorities of House and Senate Republicans had publicly committed to vote for the legislation — did experts and journalists begin to fully catch up with its defects. | Only last Friday, when the legislation came out of conference committee and was no longer subject to amendment — and when decisive majorities of House and Senate Republicans had publicly committed to vote for the legislation — did experts and journalists begin to fully catch up with its defects. |
| Two days before Congress gave final approval, a group of 13 tax law experts released the most incisive critique of the tax bill to date, a 30-page document called “The Games They Will Play: An Update on the Conference Committee Tax Bill.” | Two days before Congress gave final approval, a group of 13 tax law experts released the most incisive critique of the tax bill to date, a 30-page document called “The Games They Will Play: An Update on the Conference Committee Tax Bill.” |
| The primary authors of the report — Ari Glogower, David Kamin, Rebecca Kysar, and Darien Shanske — describe the legislation as “a substantial blow to the basic integrity of the income tax” that will “advantage the well-advised in ways that are both deliberate and inadvertent.” | The primary authors of the report — Ari Glogower, David Kamin, Rebecca Kysar, and Darien Shanske — describe the legislation as “a substantial blow to the basic integrity of the income tax” that will “advantage the well-advised in ways that are both deliberate and inadvertent.” |
| The authors cite a wide range of specific flaws, but their main argument is that the measure is gravely deficient at its core: | The authors cite a wide range of specific flaws, but their main argument is that the measure is gravely deficient at its core: |
| Glogower, Kamin, Kysar, and Shanske argue that some of the most egregious loopholes and schemes permitted by the legislation are that individual taxpayers | Glogower, Kamin, Kysar, and Shanske argue that some of the most egregious loopholes and schemes permitted by the legislation are that individual taxpayers |
| Second, the legislation creates a huge incentive for anyone in a position to do so to change his or her status from employee to “independent contractor or a partner in a firm. The game is clear: Don’t be an employee, instead be an independent contractor or partner in a firm.” The ability to make this shift is available primarily to the well-paid. | Second, the legislation creates a huge incentive for anyone in a position to do so to change his or her status from employee to “independent contractor or a partner in a firm. The game is clear: Don’t be an employee, instead be an independent contractor or partner in a firm.” The ability to make this shift is available primarily to the well-paid. |
| The legislation, according to Glogower and his colleagues, also fails to present a coherent rationale: | The legislation, according to Glogower and his colleagues, also fails to present a coherent rationale: |
| The bill encourages tax evasion. Glogower and his colleagues cite | The bill encourages tax evasion. Glogower and his colleagues cite |
| To provide an example, they use a company that purchased equipment under existing law, which provides them with tax breaks on the cost spread out over the years in a depreciation schedule. The new law allows companies to immediately write off the full cost of buying equipment, known as expensing. | To provide an example, they use a company that purchased equipment under existing law, which provides them with tax breaks on the cost spread out over the years in a depreciation schedule. The new law allows companies to immediately write off the full cost of buying equipment, known as expensing. |
| “So,” the authors ask, “what does that mean?” | “So,” the authors ask, “what does that mean?” |
| I emailed some of the authors of this report for their individual thoughts. | I emailed some of the authors of this report for their individual thoughts. |
| Michael Kane, a law professor at N.Y.U., wrote in response that the bill will | Michael Kane, a law professor at N.Y.U., wrote in response that the bill will |
| Daniel Hemel, a law professor at the University of Chicago, raised a crucial question about the long-term effects of the legislation’s adoption of chained CPI, a method of calculating the rate of inflation for the earned-income tax credit and other sections of the tax code that provide breaks to working- and middle-class families. | Daniel Hemel, a law professor at the University of Chicago, raised a crucial question about the long-term effects of the legislation’s adoption of chained CPI, a method of calculating the rate of inflation for the earned-income tax credit and other sections of the tax code that provide breaks to working- and middle-class families. |
| He noted that | He noted that |
| In the first year, 2018, the changed inflation rate raises a relatively modest $31.5 billion but it grows every year, reaching $37 billion in 2027. “To be sure,” Hemel wrote, “this affects everyone to some degree, but most of the burden is paid for by families in the bottom four quintiles.” | In the first year, 2018, the changed inflation rate raises a relatively modest $31.5 billion but it grows every year, reaching $37 billion in 2027. “To be sure,” Hemel wrote, “this affects everyone to some degree, but most of the burden is paid for by families in the bottom four quintiles.” |
| In the long term, Hemel argued, | In the long term, Hemel argued, |
| What may prove even more significant is that the shift to chained CPI — a less generous, slower-growing measure of inflation than the one currently in use — would not only result in a tax increase over time, it would set a precedent for Republicans who would like to use the same method to pare back so-called entitlement programs like Social Security and Medicare. It is, in effect, a backdoor method of reducing benefits for the elderly and the disadvantaged without public scrutiny or debate. | |
| This full-speed-ahead strategy simultaneously constrained the ability of the press to explore the special interest provisions buried in the legislation. | This full-speed-ahead strategy simultaneously constrained the ability of the press to explore the special interest provisions buried in the legislation. |
| One exception is the work of three reporters from International Business Times — Alex Kotch, David Sirota and Josh Keefe — who have pursued this line of inquiry for the past week. A recent story disclosed that a provision inserted at the last minute into the bill stands to lower taxes on the income of 14 Republican Senators. | One exception is the work of three reporters from International Business Times — Alex Kotch, David Sirota and Josh Keefe — who have pursued this line of inquiry for the past week. A recent story disclosed that a provision inserted at the last minute into the bill stands to lower taxes on the income of 14 Republican Senators. |
| Along parallel lines, a liberal think tank, the Center for American Progress, now estimates that Senator Ron Johnson, Republican of Wisconsin, will get an annual tax break of somewhere between $21,500 and $205,000 based on his 2016 financial disclosure statement. The center’s calculations are based on Johnson’s reported income from three holdings he said produced a minimum of $215,002 up to a maximum of $2,050,000. | Along parallel lines, a liberal think tank, the Center for American Progress, now estimates that Senator Ron Johnson, Republican of Wisconsin, will get an annual tax break of somewhere between $21,500 and $205,000 based on his 2016 financial disclosure statement. The center’s calculations are based on Johnson’s reported income from three holdings he said produced a minimum of $215,002 up to a maximum of $2,050,000. |
| And the 2016 financial disclosure statement filed by Senator Steve Daines, Republican of Montana, shows income from real estate holdings of $487,500 to $4,305,000. If Daines’ tax cut is computed using the same method that the center used for Johnson, it would be between $47,582 and $430,500. | And the 2016 financial disclosure statement filed by Senator Steve Daines, Republican of Montana, shows income from real estate holdings of $487,500 to $4,305,000. If Daines’ tax cut is computed using the same method that the center used for Johnson, it would be between $47,582 and $430,500. |
| Not only are many senators direct beneficiaries of the legislation, but 15 of the top 20 Senate recipients of contributions from the real estate industry are Republicans, according to Open Secrets, ranging from Marco Rubio at $3.27 million to Chuck Grassley at $276,636. | Not only are many senators direct beneficiaries of the legislation, but 15 of the top 20 Senate recipients of contributions from the real estate industry are Republicans, according to Open Secrets, ranging from Marco Rubio at $3.27 million to Chuck Grassley at $276,636. |
| Perhaps most important, the measure rewards those who need it least — the very wealthy — while leaving those most in need with modest and temporary tax breaks. The bill will diminish opportunities for social mobility by doubling the estate tax exemption, further entrenching generation after generation at the top of the income distribution. | Perhaps most important, the measure rewards those who need it least — the very wealthy — while leaving those most in need with modest and temporary tax breaks. The bill will diminish opportunities for social mobility by doubling the estate tax exemption, further entrenching generation after generation at the top of the income distribution. |
| As my colleague Jim Tankersley put it on Dec. 16, the final version of the legislation | As my colleague Jim Tankersley put it on Dec. 16, the final version of the legislation |
| The accompanying chart, which is based on an analysis done by the nonpartisan Tax Policy Center, describes the distribution of the benefits by income groups over the next decade. | |
| Despite the fact that the measure is a tax cut, the majority of Americans, 53 percent, currently disapprove of the law and 35 percent approve, according to a CBS Poll. Most Americans believe the bill will help large corporations (76 percent) and the wealthy (69 percent), while 35 percent believe it will help the middle class and 24 percent said their own families will gain. | Despite the fact that the measure is a tax cut, the majority of Americans, 53 percent, currently disapprove of the law and 35 percent approve, according to a CBS Poll. Most Americans believe the bill will help large corporations (76 percent) and the wealthy (69 percent), while 35 percent believe it will help the middle class and 24 percent said their own families will gain. |
| A tax expert who insisted on anonymity in order to protect client confidentiality, emailed me his critique of the bill: | A tax expert who insisted on anonymity in order to protect client confidentiality, emailed me his critique of the bill: |
| The tax bill not only alters the competitive structure of American industry but includes such major provisions as opening the Arctic National Wildlife Refuge in Alaska to oil drilling and the elimination of mandatory individual health insurance under Obamacare. | The tax bill not only alters the competitive structure of American industry but includes such major provisions as opening the Arctic National Wildlife Refuge in Alaska to oil drilling and the elimination of mandatory individual health insurance under Obamacare. |
| What amounted to three major pieces of legislation were approved by the full House and the Senate Finance Committee, “two weeks after the bill was unveiled, without a single hearing on the 400-plus-page legislation,” as Thomas Kaplan and Alan Rappeport put it in The Times. | What amounted to three major pieces of legislation were approved by the full House and the Senate Finance Committee, “two weeks after the bill was unveiled, without a single hearing on the 400-plus-page legislation,” as Thomas Kaplan and Alan Rappeport put it in The Times. |
| How well does this procedure stand up to the requirements Senator Ben Sasse specified in his maiden Senate speech on Nov. 3, 2015? In it, Sasse argued that the Senate was failing in its responsibility to fully air and debate the important issues before the county, calling for what he called “a cultural recovery inside the Senate”: | How well does this procedure stand up to the requirements Senator Ben Sasse specified in his maiden Senate speech on Nov. 3, 2015? In it, Sasse argued that the Senate was failing in its responsibility to fully air and debate the important issues before the county, calling for what he called “a cultural recovery inside the Senate”: |
| Or, for that matter, how well does the bill fit with Senator John McCain’s determination to lay down the law on “regular order,” as outlined in an Aug. 31 op-ed in the Washington Post? “We are proving inadequate not only to our most difficult problems but also to routine duties,” McCain wrote. Or as McCain noted during the debate over legislation to repeal Obamacare, he was calling | Or, for that matter, how well does the bill fit with Senator John McCain’s determination to lay down the law on “regular order,” as outlined in an Aug. 31 op-ed in the Washington Post? “We are proving inadequate not only to our most difficult problems but also to routine duties,” McCain wrote. Or as McCain noted during the debate over legislation to repeal Obamacare, he was calling |
| So far, however, only one Republican senator has suffered real costs for deciding to vote for the tax bill. | So far, however, only one Republican senator has suffered real costs for deciding to vote for the tax bill. |
| Just over two months ago, Bob Corker drew a line in the sand on the bill: if it raised the deficit, he would vote no: | Just over two months ago, Bob Corker drew a line in the sand on the bill: if it raised the deficit, he would vote no: |
| On Oct. 5, Susan Davis of National Public Radio put Corker on record with a series of quotes that he may have come to regret: | On Oct. 5, Susan Davis of National Public Radio put Corker on record with a series of quotes that he may have come to regret: |
| For Corker, this issue went way beyond routine politics: “Deficits matter,” he forcefully asserted. “They are a greater threat to us than North Korea or ISIS.” | For Corker, this issue went way beyond routine politics: “Deficits matter,” he forcefully asserted. “They are a greater threat to us than North Korea or ISIS.” |
| This past week Corker has decided that the deficit is no longer “the most passionate thing for me.” Instead, he voted for a tax bill that will increase the deficit by $1.46 trillion over ten years. In a statement, Corker declared: | This past week Corker has decided that the deficit is no longer “the most passionate thing for me.” Instead, he voted for a tax bill that will increase the deficit by $1.46 trillion over ten years. In a statement, Corker declared: |
| All of this raises a basic question. How could nearly every Republican representative — and all 52 Republican senators — support the tax bill? The best answer may be the most cynical: because it benefits key leaders, their friends, their heirs and their donors. | All of this raises a basic question. How could nearly every Republican representative — and all 52 Republican senators — support the tax bill? The best answer may be the most cynical: because it benefits key leaders, their friends, their heirs and their donors. |
| After looking at the legislation in its entirety — its substance and the procedures used to get there — it is difficult to conclude that the motivations of its sponsors are either benevolent or somehow in the best interests of the country. More likely it is hypocrisy and venality mixed up into one awful bill. | After looking at the legislation in its entirety — its substance and the procedures used to get there — it is difficult to conclude that the motivations of its sponsors are either benevolent or somehow in the best interests of the country. More likely it is hypocrisy and venality mixed up into one awful bill. |