The GOP Tax Bill: A Disaster of Trumpian Proportions

No matter how you slice it, both the House and the Senate versions of the tax reform bill pose a grave danger to our economy for decades to come.  The Congressional Budget Office estimated the House bill would increase the deficit by $1.7 Trillion over the next 10 years.  House Republicans have objected to this estimate because it doesn't account for the job growth that will result from the tax cut.  The Republicans might not have liked that estimate, but they were in such a hurry to pass their bill that they refused to wait for the CBO to calculate a dynamic score. However, dynamic scoring from the Wharton School at the University of Pennsylvania and the Tax Foundation both indicate that the deficit will increase by over $1 trillion.

And in some respects, the Senate Bill was worse than the House Bill. According to the nonpartisan Joint Committee on Taxation's dynamic score, the Senate would run up $1 trillion in deficits over the next decade.  Republican Senators were not happy when they heard this and, as Jim Tankersly, a tax and economics reporter for the New York Times, discussed in this thread of tweets, they decided to ignore or rationalize away the estimate completely. What made the Senate bill worse than the House bill was that the Senate Bill would destabilize the health care industry by eliminating the individual mandate that was the foundation of Obamacare. The Congressional Budget Office estimated that this would cause 13 million people to lose their health insurance by 2027

There were other differnces between the bills. For example, The Senate tax bill doubles the size of an estate that will be exempt from taxation from $5.5 million per person to $11 million per person. That is not enough for Senator Chuck Grassley. He wishes the Senate version of tax reform contained the same total repeal of the estate tax that the House version contains. He revealed his contempt for the working class when he explained why.

I think not having the estate tax recognizes the people that are investing, as opposed to those that are just spending every darn penny they have, whether it’s on booze or women or movies.


We can only speculate as to whether other GOP politicians who have voted for a giant transfer of wealth from the working class to the rich share Grassley's contempt for us.  And make no mistake about it. Almost all the benefits of this tax cut go to the rich and very little go to the poor. In fact, the poor will end up paying MORE under the Senate version of the plan.  

And the poor and middle class will be hurt by cuts in Medicare, Medicaid, and Social Security that will be necessary to offset the massive deficits. This is not speculation on my part. Several prominent Republican politicians such as House Speaker Paul Ryan, Senate Finance Committee Chair Orin Hatch, and Donald Trump have hinted that there will have to be cuts in government programs, and they seem to be taking aim at programs intended to help the poor. And Florida Senator Marco Rubio specifically mentioned that "structural changes" (i.e. cuts) will have to be made to Social Security and Medicare to pay for this bill. (Medicare alone could see a reduction of $25 billion a year)

Even if it was not the goal of Republicans to make the rich even richer by screwing the middle and lower class--even if the goal was to produce a fair tax cut plan that enabled everyone to benefit from cuts without slashing social programs vital for the working class, the speed with which the tax bill was rushed through Congress without hearings from expert witnesses guarantees that it will include errors with unintended consequences. Politico reports

What is unusual is the sheer scope of the legislation now before lawmakers, and the speed with which it’s moving through Congress. Republicans are trying to muscle the plan through the Capitol before special interest groups can mobilize opposition.


The House passed its draft of the proposal, from introduction to final vote, in two weeks flat. The normally balky Senate needed barely three weeks to move its plan.

By comparison, it took Democrats more than six months to pass the Affordable Care Act. . . .

“The more you read, the more you go, ‘Holy crap, what’s this?'” said Greg Jenner, a former top tax official in George W. Bush’s Treasury Department. “We will be dealing with unintended consequences for months to come because the bill is moving too fast.”

Republican Senators rushed this bill forward and passed this nearly 500 page bill at 2 am in the morning without even giving their Democratic colleagues more than two hours to read it.  What's worse, they scrawled barely legible handwritten notes in the margins of the bill and didn't wait for the bill t be up before voting on the bill.



Robert S. McElvaine, author of "The Great Depression: America, 1929-1941" writes that this tax bill implements the policies that led to the Great Depression. 

Just how disastrous would the proposed reincarnation of the failed Republican trickle-down policies of the past be for the American people and the future of the nation? A few ways:

  • Repealing the estate tax, or, as Republicans have dubbed it, the “death tax.” But the estate tax is not a tax on the dead; it is a tax on their heirs. Repeal would reverse an important aspect of the American Revolution and establish an American hereditary aristocracy. If your estate is not above $11 million, your benefits from this portion of the GOP’s tax cut will be a nice round number: zero.
  • Eliminating deductions for state and local taxes. The GOP has called these deductions favoritism for people who live in high-tax states. In fact, ending deductibility of state and local taxes would tax income that has already been taxed away from a taxpayer. It is, quite simply, double taxation.
  • Repealing the Alternative Minimum Tax, which assures that wealthy people who hire accountants to find all the obscure ways to avoid taxes cannot escape taxation altogether. Repealing it would save Trump millions.
  • Extending the “pass-through” provision to noncorporate businesses, including some 500 entities Trump owns. It would allow the owners of these businesses to pay taxes at 25 percent, instead of 39.9 percent. This provision would allow Wall Street fund managers, among other very wealthy people, to pay a lower tax rate than many middle-class Americans pay.
  • Ending the deductibility of large medical expenses.
  • Taxing waived tuition for college students, ending deductibility for student loan payments, and even disallowing teachers from deducting what they spend on school supplies for their students.
  • Ending the Affordable Care Act’s individual mandate, which would cause 13 million Americans to lose health insurance and result in much higher premiums for those who do get insurance through the exchanges. The Congressional Budget Office has indicated that, if enacted, the Republican tax bill may force deep cuts in Medicare through a generally unknown budget rule that its deficits would trigger.



And Forbes, hardly a screaming liberal publication, analyzed the House version of the bill with this ever so subtley titled article: GOP Tax Bill Is The End Of All Economic Sanity In Washington.


The real economic insanity of the GOP's tax bill will be felt in future years. Consider the following.

The $1 trillion a year budget deficit will not be the result of cyclical changes that will be reversed when the economy improves. These will be permanent structural deficit increases.

  • The tax hikes that will be needed to resolve the structural imbalance between federal spending and revenues will be impossible for political reasons.
  • Whenever the U.S. economy grows more slowly than expected or there's a downturn, an annual deficit of $2 trillion could easily become the norm.
  • The federal government will have far less ability to respond to economic downturns unless previously unimaginable and politically intolerable deficits, tax increases or spending cuts suddenly become acceptable.
  • Reduce the national debt? As they say in New York, fuhgeddaboudit at least in the next decade.
  • Much more national debt plus rising interest rates means interest on the national debt will be the fastest growing part of the federal budget.
  • Without massive cuts in Social Security, Medicare and the Pentagon, it won't be possible to reduce federal spending enough to do more than tweak the deficit.
  • Washington's ability to invest in anything new that will improve the economy (think infrastructure, education and medical research) will be far less given the already-high deficits.
  • Even though the limits to monetary policy became obvious the past few years, the Federal Reserve will be the major economic policy maker in Washington over the next decade.
  • In other words, if the GOP tax bill is enacted, Congress and the president this year will give up almost all ability to deal with the U.S. economy for at least a decade even when, as almost certainly will happen, there's a downturn. No one else will be able to fulfill this role.


And if that's not enough to convince you how calamitous this GOP tax reform is, then I suggest reading this a series of tweets by Steve Schmidt, a former spokesman for the National Republican Congressional Committee who led the day-to-day operations of John McCain's 2008 Presidential campaign.



This tax bill demonstrates,once again, the total collapse of all and any rigor around the policy making process in the GOP congress. It is built on a foundation of lies. It adds more than a trillion to the debt. No real conservative should vote for this

— Steve Schmidt (@SteveSchmidtSES) December 1, 2017







Update 12/10/17:Michael Landen provided a very useful analysis in this series of tweets on how we can best defeat this tax bill. Please double click on his tweet, read his thread and follow his suggestions.



He even provided us a list with the most important Representatives to call.