Editor’s Note: Edward J. McCaffery is Robert C. Packard trustee chair in law and a professor of law, economics and political science at the University of Southern California. He is the author of “Fair Not Flat: How to Make the Tax System Better and Simpler” and founder of the People’s Tax Page. The opinions expressed in this commentary are his own.
Story highlights
GOP tax plan offers massive treats for the rich and confusing tricks for the rest of us, tax expert Edward McCaffery writes
The benefits for the wealthy are a key part of the tax plan, which adds $1.5 trillion to the national debt
Republicans continue to act like indifferent teenagers who stayed up too late gathering candy on Halloween. Much like with their as-yet-unsuccessful Obamacare repeal and replace efforts, the Grand Old Party has spent years talking about tax reform. Details? They can wait. The “Unified Framework” for tax reform that the President and his Republican compatriots released at the end of September looked like a high school book report puffed up to meet the teacher’s page count requirements.
Now, two days after Halloween, we finally get some of those details, as Speaker of the House Paul Ryan released “the most sweeping rewrite of the tax code in decades.”
What do we see?
The same old, same old: massive treats for the rich and confusing tricks for the rest of us.
The Tax Cuts and Jobs Act (not the Cut, Cut, Cut Act as President Trump had wanted to call it) is much like the Unified Framework, with a few more details. Those details show that Republicans just cannot stay away from giving more candy to all those adorable billionaires and their babies while deceiving and distracting the rest of us.
The treats for the rich include slashing the corporate tax rate from 35% to 20%; adding a new 25% rate for “pass through entities,” of which President Trump has an ownership interest in approximately 500; repealing the alternative minimum tax, as a result of which Trump had to pay over $30 million in 2005, the last year in which we have proof that he actually paid taxes; and gradually phasing out the estate tax, which is paid, according to Gary Cohn, Trump’s chief economic adviser, only by multimillionaire morons.
These treats for the rich go a long way to adding $1.5 trillion to our national debt – a trick for the future to figure out how to pay.
As for the rest of us, the masses of not-rich? Here’s where the tricks come in. Some features, such as the doubling of the standard deduction; the slight decrease in tax rates (the lowest non-zero rate actually goes up, from 10% to 12%); and the also slight (too slight for Republican Marco Rubio) increase in the child credit from $1000 to $1600 will indeed help middle class wage-earners. But other features, such as the repeal of the head of household status; the elimination of personal exemptions; and the loss of most state and local tax and the medical expense deductions will hurt others.
How can we tell who “wins” and who “loses” in a very narrow, immediate sense? To be precise, most ordinary folk likely will have to wait until April, 2019 – after the midterm elections – when we fill out tax returns for the 2018 year.
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But there are strong hints of where this is heading: a Brookings study of the Trump “unified framework” has already found that the tax cuts for the highest income taxpayers will be much larger, on a percentage basis, than for those with lower incomes.
President Trump and his fellow Republicans are suggesting this will amount to a $4,000 wage increase for regular Americans – on account of the corporate tax rate cut. Many economists have their doubts.
Trick or treat? You be the judge.
When all the dust settles, we end up where we started, where Republicans have always been. As confusing as it is to figure out the many losers from this proposed law, it is abundantly clear who the winners are: America’s plutocrats, including the man in the White House.
Happy Halloween, rich kids.
