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“At The Top Of The To-Do List For 2017”: Here’s What Will Happen On Taxes If A Republican Is Elected President

The Tax Policy Center has released an analysis of Marco Rubio’s tax plan, which, like their analyses of Jeb Bush’s plan and Donald Trump’s plan, shows that it would result in a staggering increase in the deficit if it were implemented — $6.8 trillion in Rubio’s case, compared to an identical $6.8 trillion for Bush and $9.5 trillion for Trump.

The problem is that it’s awfully hard to wade through all these details and numbers, grasp the distinctions between them, and determine which one you find preferable.

The good news is, you don’t have to.

That’s in part because the differences between the various Republican candidates’ plans are overwhelmed by what they have in common. But more importantly, it’s because if one of them becomes president, the tax reform that results will reflect not so much his specific ideas as the party’s consensus on what should be done about taxes.

So to simplify things, here’s what you can expect if a Republican is elected president in November:

  1. Income tax rates will be cut
  2. Investment tax rates will be cut
  3. The inheritance tax will be eliminated
  4. Corporate income tax rates will be cut
  5. Corporations will be given some kind of tax holiday to “repatriate” money they’re holding overseas

And that’s basically it. Yes, there will be hundreds of provisions, many of which could be consequential, but those are the important things, and the things almost all Republicans agree on.

Let’s keep in mind that this is the policy area Republicans care more about than any other. There are pockets of conservatives for whom the details of defense policy are important, and others who care a lot about education, and even a few who care a lot about health care. But all of them want to cut taxes. They may get passionate talking about how much they want to repeal the Affordable Care Act, or how tough they’ll be on border security, or how they’ll totally destroy the Islamic State. But if a Republican is elected in 2016, it is a stone-cold guarantee that changes to the tax code will be at the top of the to-do list for 2017.

That doesn’t mean, however, that the tax reform we get will be exactly what that president promised during the campaign. For instance, Ted Cruz is proposing what’s essentially a Value Added Tax (VAT). But he won’t get that passed even with a Republican Congress, because it’s controversial within the party.

That’s critical to understand. It isn’t as though congressional Republicans, who have been waiting to do this for years, will just take the new president’s plan and hold a vote on it. Instead, they’re going to hammer out a complex bill that reflects their common priorities. It will be a product of the party’s consensus on what should be done about taxes, a consensus that has been forming since the last time they cut taxes, during the George W. Bush administration.

You can make an analogy with the ACA. By the time 2008 came around, Democrats had arrived on a basic agreement on what health care reform would look like. That isn’t to say there was no disagreement within the party. But the outlines had been agreed to by the most powerful people and the wonks within the party: expand Medicaid for those at the bottom, create exchanges for people to buy private insurance, offer subsidies to those in the middle. That’s why the plans offered by Barack Obama, Hillary Clinton, and John Edwards in that election all followed that outline, and that’s what the Democratic Congress eventually produced.

The things that I listed above are the essential tax consensus of the GOP at the moment. Some people would add or modify some elements — Rubio, for instance, would completely eliminate investment taxes while others would merely reduce them, but he would also expand the child tax credit. But the outline is the same, particularly in its effects. Here’s how we can summarize those:

  1. Poor and middle-class people will pay a little less in taxes
  2. Wealthy people will pay a lot less in taxes
  3. Corporations will pay a lot less in taxes
  4. The deficit will explode

Republicans, who profess to care deeply about deficits, will claim that their tax plan won’t actually cost anything (or will cost very little), because when you cut taxes, you create such a supernova of economic growth that the cost of the cuts is offset by all the new revenue coming in. This is sometimes referred to as a belief in the “Tax Fairy” because it has as much evidence to support it as a belief in the Tooth Fairy. It is a fantasy, but their continued insistence that it’s true requires us to address it.

You don’t need a Ph.D. in economics to remember the history of the last quarter-century. Bill Clinton raised taxes, and Republicans said the country would plunge into recession and the deficit would balloon; instead we had one of the best periods of growth in American history and we actually got to federal budget surplus. Then George W. Bush cut taxes, and Republicans said we’d enter economic nirvana; instead there was incredibly weak job growth culminating in the Great Recession. Barack Obama raised taxes, and Republicans said it would produce economic disaster; instead the deficit was slashed and millions of jobs were created.

So we don’t actually have to argue about whether the Republican tax plan will increase the deficit, because the theory behind it has been tested again and again, and the results are obvious. If they cut taxes as they’d like, maybe the deficit will go up by a trillion dollars, or five trillion, or eight trillion. We don’t know exactly how much it will go up, but we know it will go up.

As far as Republicans are concerned, dramatic increases in the deficit are a reasonable price to pay to obtain the moral good of tax cuts. If you think I’m being unfair, ask them whether they believe Bush’s tax cuts were a mistake. They don’t.

You can agree or disagree. But you don’t have to wonder what will happen if a Republican is elected. There may be other plans that president will be unable or unwilling to follow through on, but I promise you, cutting taxes is one thing he absolutely, positively will do. And we don’t have to wonder what it will look like. We already know.


By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, February 12, 2016

February 13, 2016 Posted by | GOP Presidential Candidates, Tax Cuts, Tax Reform | , , , , , , , , | Leave a comment

“Don’t Let The GOP Buy Your Vote, Stupid”: The GOP Has Zero Credibility When It Comes To Fiscal Responsibility

If you want to understand exactly how the Republicans plan to buy the votes needed to win the 2016 presidential election, look no further than “The Economic Growth and Family Fairness Tax Plan.”

Heard of it? The plan, which is being touted with Willy Loman-esque desperation by Sens. Marco Rubio and Mike Lee, seeks to fix our “antiquated and dysfunctional…federal tax system.” And it’s won slow clap after slow clap from Republican-friendly conservatives at Americans for Tax Reform, National Review, and The American Enterprise Institute, whose James Pethokoukis raves, “Lee and Rubio might have cooked up the first great tax cut plan of the 2000s.”

Yeah, not so much. Despite some good features that would likely spur economic growth—such as reducing corporate tax rates by 10 percentage points, switching to a territorial collection system, and capping business-income rates filed on individual Schedule C forms—what the plan does is return us to the early years of the George W. Bush presidency, when budget continence was never allowed to get in the way of shoveling cash to targeted voters.

Recall, for instance, how Bush and a Republican Congress pushed through an unfunded (and unnecessary) Medicare prescription drug plan back in 2003 as a straight-up gift to seniors, who had voted Democratic in 2000. Mission accomplished: Bush went from getting just 47 percent of the senior vote against Al Gore in 2000 to pulling 52 percent of the 65-plus crowd against John Kerry in 2004.

At least Bush was pissing away theoretical budget surpluses that were falsely projected to last far into the future. After years of record-setting deficits and mounting national debt, today’s politicians certainly don’t have that excuse. Yet last year’s Republican budget resolution called for net spending increases every year for the next 10 years, starting at $3.7 trillion and culminating in projected spending of $5 trillion in 2024 (in current dollars). And given the whopping increases in real per-capita spending under a Republican president and Congress during Bush’s first term in office, the GOP has zero credibility when it comes to fiscal responsibility.

There’s no doubt that a spending hawk such as Lee, who has proposed a balanced-budget amendment in the past, knows that. Yet at the heart of his and Marco Rubio’s plan is a massive giveaway to parents in the form of a new $2,500 child tax credit (this would be added to an already existing $1,000 child credit) with no phase-out due to income.  However, because it’s “limited to the sum of total income and payroll tax liabilities, including employer-side payroll tax liability,” it means that low-income parents won’t be able to claim the full amount.

The expanded child credit is a big reason why, as AEI’s Pethokoukis grants, the plan would “lose something like $4 trillion in federal tax revenue over a decade, maybe half that if you apply ‘dynamic scoring’ that factors in the effects of economic growth.” (Dynamic scoring attempts to model changes in people’s behavior to changes in the tax code. While the method is easily abused, its core insight—that we change our consumption patterns when costs and benefits vary—is sound.)

But unlike cutting taxes on business activity or trimming top marginal tax rates, expanding the child tax credit has nothing to do with spurring economic growth. This is something that conservatives grant in most contexts. As Curtis S. Dubay of the Heritage Foundation wrote just last year, “Increasing the credit would be a targeted tax cut that would put more money in the pockets of people who qualify for the expansion. However, it would not improve economic growth like rate reductions would because a [child tax credit] increase would not reduce those disincentives on productive activities.”

The free-market Tax Foundation agrees. In fact, in an analysis of the Rubio-Lee plan, it ran both static and dynamic scores of the plan. On its static score for the next 10 years, the Tax Foundation found the Rubio-Lee plan meant serious reductions in annual federal revenue. For instance, switching to just two tax brackets of 15 percent and 35 percent would mean $31 billion less each year compared to current law. The full expensing of business equipment would lead to another annual loss of $78 billion, while the changes to the business taxes would cut $210 billion. And the expanded child tax credit would mean the feds would forgo another $173 billion.

Yet in its dynamic score of the same provisions, something different happens. The consolidation of tax brackets yields an average annual net gain of $5 billion, full expensing yields of $115 billion, and the changes in business taxes pulls in a net of $210 billion a year. But the expanded child tax credit? It still shows an average annual loss of $173 billion.

So the expanded child tax credit has nothing to do with promoting growth. Indeed, as my frequent co-author Veronique de Rugy points out at National Review, the generally accepted best way to promote economic growth via tax policy is by cutting high marginal rates. But because of the size and scope of Rubio and Lee’s expanded child tax credit they can’t reduce the top individual rate below 35 percent without punching an even bigger hole in revenue. “If bolstering the economic status of families is the point of all this,” she writes, “the way to go is lower tax rates, not a tax credit.”

In their explanation of the plan, Rubio and Lee claim that the expanded child tax credit is simply a way of abolishing what they call “the Parent Tax Penalty.” I’m sure I’m not the only one who has trouble following the logic here: “As parents simultaneously pay payroll taxes while also paying to raise the next generation that will pay payroll taxes, parents pay more into the old-age entitlement systems.” Huh? Parents pay to raise their children, yes. When those kids enter the workforce, they (not their parents) will pay taxes on their wages. Forget those “It’s a child, not a choice” bumper stickers. Kids today apparently are to be most valued for their ability to pay into unsustainable old-age retirement plans that need to be scrapped, not propped up.

Questions abound: If the amount of income subject to Social Security taxes is capped, doesn’t it also make sense then to phase out the credit above certain income levels? What about all the tax dollars that flow to children (and their parents) during their first 18 to 21 years? And if the expanded child tax credit is supposed to credit parents for future tax payments made by their children (yes, getting complicated), then why are low-income parents’ credits “limited to the sum of total income and payroll tax liabilities”? Aren’t we crediting parents for their kids’ future tax payments?

I’d argue instead that the “family fairness” portion actually has very little to do with the future past the 2016 election. Expanding the child tax credit, especially in a way that keeps the full amount for middle- and upper-class parents while limiting the amount low-income parents can get, is a pretty obvious (and obnoxious) way to buy votes among likely Republican voters. Especially when we all know that the GOP has no intention of trimming $173 billion out of federal spending to pay for it.

We’re long past the time for a serious conversation about how much government we want to buy and at what price. If the Obama years are any indication, the Democrats are genuinely uninterested in having that conversation. (The president’s latest budget proposal would increase spending over the next decade by more than 50 percent and end the period with bigger annual deficits than we have today.) But the Republicans, who are supposed to know better and be better on fiscal issues, are part of the problem too.

Every bit as much as the tax-and-spend Dems they love to attack, the Party of Reagan ushered in “the Golden Age of Government by Groupon.”

The only question that remains is how much our kids and grandkids will hate us for how much debt—I mean “family fairness”—we’ve amassed in their name.


By: Nick Gillespie, The Daily Beast, March 13, 2015

March 14, 2015 Posted by | Fiscal Policy, GOP, Tax Reform | , , , , , , , , , | Leave a comment

“Paul Ryan’s Poor Memory Fails Him Again”: Ryan Just Doesn’t Remember Current Events Very Well

I’ve long marveled at Rep. Paul Ryan’s (R-Wis.) unusually poor memory, and his latest complaints about immigration policy suggest his recall troubles are getting worse (via Jon Chait).

“We’ve gone to the president and said, ‘Give us time to do immigration reform, to work on the issue this year. We want to get this done.’ And this is the reaction he has to that?” said Rep. Paul Ryan (R-Wis.), the 2012 vice presidential candidate. “He had two years with a super-majority of his own party, and he didn’t lift a finger. And now he won’t give us a few weeks?”

It takes a truly talented individual to pack in this many falsehoods into a single paragraph.

“Give us time to do immigration reform”? Well, Republicans have controlled the House for four years, during which time they haven’t even held so much as a hearing on a piece of legislation. More to the point, the Senate passed a popular, bipartisan immigration bill 512 days ago, and soon after, House Speaker John Boehner (R-Ohio) promised the lower chamber would act on the issue. The Republican leader then broke his word and killed the reform effort.

In other words, Obama gave Republican lawmakers “time to do immigration reform,” and the GOP did nothing. Does Ryan not remember this?

“He had two years with a super-majority of his own party”? Actually, no, Democrats had a super majority in the Senate for four months, not two years. It’s a big difference.

“He didn’t lift a finger”? Actually, Democrats tried to pass the DREAM Act, which used to be a bipartisan policy, when they controlled Congress. Republicans killed it with a filibuster.

“And now he won’t give us a few weeks?” Well, President Obama not only gave Republicans all kinds of time, he also received no guarantee – from Ryan or any other GOP leader – that another delay would lead to real legislation. So what in the world is Ryan talking about?

It gets worse. Ryan also complained this week that Obama’s decision to govern on immigration policy means Republicans won’t govern on their own priorities.

Lori Montgomery reported on Wednesday on Ryan’s plans, now that he’ll be chairing the House Ways & Means Committee.

An overhaul of the nation’s tax laws will also rank high on the agenda when Ryan (R-Wis.) takes the helm of the tax-writing panel in January.

“We’d like to do it sooner rather than later, but we don’t control everything,” Ryan said in an interview. He cited Obama’s longstanding refusal to roll out his own tax plan as well as the president’s recent decision to forge ahead with a unilateral ban on the deportation of some undocumented immigrants – a move that has inflamed Republicans.

Again, comments like these suggest Ryan just doesn’t remember current events very well. In reality, Obama presented a blueprint for tax reform and asked lawmakers to work on details that could pass both chambers. A bipartisan tax-reform plan came together, at which point, House Republicans killed it.

That’s not opinion. It’s just what happened.

Complicating matters, Ryan prefers a more right-wing version of tax reform than the one outgoing Ways & Means Chairman Dave Camp (R-Mich.) unveiled, with Ryan’s version focused primary on – you guessed it – tax breaks for the wealthy.

Chait’s conclusion rings true: “It’s just bizarre for Ryan to lament that Obama’s plans to make immigration enforcement more humane is costing him the chance to cut taxes for the rich.”


By: Steve Benen, The Maddow Blog, November 22, 2014

November 22, 2014 Posted by | Immigration Reform, Paul Ryan, Tax Reform | , , , , , , | Leave a comment

“Two Different Fantasies”: The Coming Conservative Tax Cut Deficits Will Make Bush’s Look Puny

For going on a year now, a group of reform-minded conservatives has been gently coaxing more pious coreligionists into supporting a tax reform plan that would violate the first commandment of supply-side economic theory.

In a broad sense, the two groups share similar goals. Both want to distribute income upward. The difference is that reformicons would like to limit the amount of upward redistribution to preserve some significant spoils for middle-class workers with children. They’ve rallied behind legislation, drafted by Senator Mike Lee (a Tea Party favorite from Utah) that would lower the top marginal tax rate only modestlyfrom about 40 to 35while creating generous new tax credits for families with kids. The supply siders, as you probably guessed, want to ply those spoils into even larger rate cuts for the wealthy. The poor are left almost entirely out of the equation.

Under normal circumstances, the two camps would resolve a policy dispute like this by splitting the baby (the proverbial one; not the human one that comes with a generous tax-subsidy). But as supply-side stalwart Congressman Paul Ryan explained recently, asking rate-cutters like him to check their rate-cutting ambitions would be like asking Lance Armstrong to share his “secret sauce” with mid-tier racersnot much help for them, at the expense of his competitive edge. And on the flip side, the reformicons can’t yield too much to the supply siders, because at some point the political payoff (more money for the middle class) would disappear along with the whatever supposed incentive the credits would create for people to start families.

Enter Ramesh Ponnuru, a high-profile reformicon, with a plan to win Ryan over using clever spin. Just pretend the Lee plan’s child tax subsidies are comparable to tax cuts for investors, except the investors here are parents rescuing the country from a bleak demographic future, and the tax cuts are actually new tax expenditures.

“You can’t draw up a realistic budget with a top tax rate of 25 percent and a large child credit,” Ponnuru writes for Bloomberg. “(You might not be able to draw up a realistic budget with a top rate of 25 percent even without the credit.) You probably can, however, draw up one with a lower top rate than we have today and better treatment for investment including parents’ investment in the next generation. Because that mix of policies would leave many millions of middle-class families ahead, it may well be easier to enact than a plan that concentrates solely on reducing the top rate. Supply-siders, that is, might achieve more of the rate reduction they seek if they embrace the credit.”

This is another way of saying that the politics of the Lee plan are vastly more appealing than the politics of the Ryan plan. The tax blueprint in Ryan’s budget is such a political disaster that it would likelier die in committee than become law in some less radical form, leaving Ryan with no rate reduction at all. Under the circumstances, he’d be better off settling for less-severe rate cuts and plying some of the projected deficits into the pockets of the middle class.

That’s absolutely true. But for supply-sider zeal, it would settle the argument under the prevailing terms. Yet those terms omit something fundamental to both plans: deficits. Neither party to the conversation has used the word deficit even once. And when you introduce the idea that both of these plansnot just Ryan’sare deficit-financed (or financed with implicit tax increases on the poor and middle classes) it becomes hard to fathom why a tug of war between the reformicons and the supply-siders is necessary at all.

Lee offsets his tax cuts by eliminating and reducing a swath of tax expenditures. Nevertheless, they would increase deficits $2.4 trillion over ten years. Ryan’s plan would probably increase them by twice as much (before offsets, which he’s never specified). There isn’t a point along the connecting line where this trespasses into fantasy. These are just two different fantasies. Under the circumstances, the smart play isn’t for the reformicons to out-debate the supply siders, or to negotiate with them, but to buy them off. Give Ryan a big rate cut. Keep the middle-class child subsidies. Don’t bother paying for either, in full.

This, as Ponnuru sort of implies, would be deeply irresponsible. But it would enjoy the dual benefits of papering over the rift and solving the GOP’s miser problem, in much the same way that George W. Bush solved his regressivity problem in 2001 by cutting everyone’s taxes (the wealthy merely got a hefty bonus tax cut).

Instead Lee is teaming up with Senator Marco Rubio to narrow the $2.4 trillion shortfall. Perhaps they’ll succeed. But they’ll also have widened the conservative rift, leaving them a plan that’s intended to forge an alliance between the ruling and working classes, but does less for the former than the supply siders and less for the latter than Democrats. Actually legislating will almost certainly require surrendering to one faction or the other.


By: Brian Beutler, The New Republic, August 26, 2014

August 27, 2014 Posted by | Deficits, GOP, Tax Reform | , , , , , , , | Leave a comment

“In Shocker, GOP Proposes Cutting Taxes For The Wealthy”: Don’t Believe The Baloney About Tax Simplification

For some time, I’ve been saying, perhaps naively, that we ought to have a real debate about tax reform, and maybe actually accompish something. Sure, Democrats and Republicans have different goals when it comes to this issue—Democrats would like to see the elimination of loopholes and greater revenue, while Republicans want to reduce taxes on the wealthy—but there may be a few things they could agree on somewhere in there. You never know.

So today, Representative Dave Camp, the chair of the House Ways and Means Committee, is releasing the latest incarnation of Republican tax reform. And it’s…exactly what you’d expect. Unfortunately.

In fact, though we’re waiting for details, it looks almost exactly like the plan Republicans released two years ago. The centerpiece is an elimination of most tax brackets, leaving only two, at 10 percent and 25 percent. In a total shocker, that means a huge tax break for the wealthy! I know—I too am amazed that Republicans would propose such a thing.

But they’ll make up the revenue, they protest. How? Well as always, Republicans say they’ll eliminate loopholes, but won’t say which ones. The reason for that is simple: everyone hates loopholes that other people benefit from, but everyone wants to keep their own loopholes. As long as you never say which loopholes you’d eliminate, nobody has reason to fight against your plan, since they don’t know whether the ox being gored is theirs or someone else’s. Furthermore, the really big loopholes are ones that lots of people love, like the mortgage interest deduction, a largely middle- and upper-class entitlement that cost the Treasury $82 billion in 2012, or the deduction for employer-provided health insurance, the largest tax expenditure at a whopping $184 billion. Think anyone’s going to eliminate those? Not on your life. But that’s where the real money is.

There is one new thing in this Republican proposal, a surtax on certain incomes over $400,000 a year, which would assumedly recover some of the money we’re losing by cutting those people’s taxes. But there are some devilish details. First, some kinds of high earners, like those in manufacturing, are excluded. And most importantly, it would only apply to wages over $400,000, and not investment income. In other words, as is usually the case with Republican proposals, they reflect a particular value: that work should be taxed at a higher rate than investments. And of course, the higher you go up the income scale, the greater the proportion of their income the wealthy get from their investments.

One final note on this. The part of the plan that will get the most attention is reducing the number of tax brackets to two. This is always offered in the name of “tax simplification,” but the truth is that the number of brackets is just about the least complicated thing about the tax code. Kevin Drum has it right:

I’m not encouraged by the fact that reducing the number of tax brackets is apparently a key feature of this “simplification” plan. That doesn’t simplify things by even an iota. The hard part of calculating your taxes, after all, is figuring out your taxable income. That takes about 99.9 percent of your time. Once that’s all done, the final step is to look up your tax rate and then multiply the rate by your taxable income. That part takes about 30 seconds.

In fact, we ought to have more tax brackets, not fewer, particularly at the high end. There’s no reason that someone making $400,000 a year should pay the same marginal rate as someone making $400 million a year.

Anyhow, the most consequential feature of this Republican tax plan, like those that came before it, is its attempt to relieve the nation’s wealthy of their burden of taxes, so terribly weighed down as they are. Maybe I’m forgetting something, but I can’t recall there ever being a Republican tax plan that didn’t propose precisely that. Ever. And they wonder why Democrats have so much success characterizing them as the party of the rich.


By: Paul Waldman, Contributing Editor, The American Prospect, February 26, 2014

February 27, 2014 Posted by | GOP, Tax Reform | , , , , , , , | Leave a comment

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