Posted by: maboulette | December 9, 2017

Most Americans Suffer When Paying for Tax Cut Factored In


Heather Long – The Washington Post – Friday, December 8, 2017 

taxes

You need to read this and have family and friends read this!

 President Trump and congressional Republicans end up paying for their proposed $1.4 trillion tax cut by reducing spending or raising taxes later on, most Americans making less than $86,000 would be worse off, according to a new report by the Tax Policy Center, a nonpartisan think tank.

HOW PAYING FOR

Republicans have yet to say how they intend to pay for the tax cut. Originally, Treasury Secretary Steven Mnuchin argued the tax cut would completely pay for itself because the economy would grow substantially faster, a claim that has not been backed up by independent research. Congress’s official scorekeepers estimate that the tax cut would add $1 trillion to the federal deficit, even after taking into account some additional economic growth.

WELFARE SPENDING

At some point, that will have to be paid for, and top Republican lawmakers, including Trump and House Speaker Paul D. Ryan (R-Wis.), have indicated they plan to take a hard look at welfare spending and other safety-net programs for potential trimming.

POOR AND LOWER MIDDLE CLASS

The Tax Policy Center warns in its “Winners and Losers” report released Friday that paying for the tax cut by reducing programs that help the poor and lower middle class would leave many Americans in the bottom 60 percent in a worse spot than they would have been without the GOP tax bill.

“Our central finding is that if either bill as written were to become law and plausible ways of financing the bill were taken into account, a significant majority of low and middle income households will eventually end up worse off than if the bill did not become law,” the researchers wrote. “In other words, they will lose more from the financing mechanisms than they will gain from the tax cuts themselves.”

CONFERENCE COMMITTEE

The House and Senate have passed tax bills, and a conference committee is beginning to meet to hammer out a final plan that both chambers can agree on and send to Trump’s desk by Christmas. The House bill would cut taxes for 76 percent of Americans next year and raise taxes on just 7 percent, according to the Tax Policy Center.

THINK TANK

But those numbers looked substantially different once the think tank factored in how to pay for the bill.

FUNDING TAX CUTS

If every household were required to pay the same amount to fund the tax cuts — roughly $1,200 — in 2018, then only 27 percent of Americans would get a cut and 73 percent of Americans would essentially be getting a tax hike. The vast majority of the families that would be worse off would be in the lower and middle classes.

CRITICS OF REPORT

Critics of the report say the Tax Policy Center is running hypothetical scenarios. There are no proposals on the table to make draconian cuts or to make every American pay a fee or tax.

“One of their major assumptions was that if you took the debt and spread it across households equally, then yes it will be extremely regressive, but that’s never going to happen,” said Gavin Ekins, a research economist at the Tax Foundation, which supports the bill.

TAX POLICY CENTER

But the Tax Policy Center says this is actually a pretty similar scenario to what the Trump budget proposed earlier this year with its cuts to various welfare and safety-net programs that mostly affect moderate-income households. The Tax Policy Center is also assuming a modest increase on higher-income households.

SCENARIOS

The three scenarios produced similar results for the Senate tax bill.

“These results emphasize that there are no free lunches in tax reform,” the authors concluded.

But critics say that the whole point of the bill is to stimulate growth in the coming years and that Republicans are unlikely to do anything that hurts the economy, such as imposing fees or reductions in government spending that hit the middle class.

ECONOMIC ADVISER

White House economic adviser Gary Cohn told Fox News on Friday that “with the tax plan we’re going to easily see 4 percent growth next year.”

Ekins, of the Tax Foundation, also pointed out that much of the United States’ $20 trillion debt was accumulated in the past decade. It’s not as if the tax bill is creating the debt problem. If anything, he said, the tax bill might help make the situation better in the next year or two because it is expected to boost growth, which should make the U.S. debt-to-GDP ratio — the metric most on Wall Street and around the world care about — look smaller.

EKINS AGREES

But Ekins agreed that how the budget is adjusted down the road will matter. He pointed out that proposals to reduce military spending and stop wealthy Americans from collecting Social Security and Medicare would be very progressive.

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