Despite Trump’s claims otherwise, tax overhaul feathers his nest
To understand the cynicism and mendacity underlying the Republican tax bill, look no further than a provision that would benefit President Donald Trump and other property tycoons that is in the final legislation Congress is expected to vote on this week.
The provision would allow people who make money from real estate to take a 20 percent deduction on income they earn through limited liability companies, partnerships and other pass-through entities that do not pay the corporate tax. The beneficiaries would also include members of Congress like Sen. Bob Corker, R-tenn., who last week decided he would vote for the bill even though Republican leaders did nothing to address his concerns about an exploding federal deficit.
The biggest winners would be people like Trump, his family and similarly advantaged developers who make tens or hundreds of millions of dollars every year on swanky office towers and luxurious apartment buildings. An earlier version of the bill passed by the Senate provided a 23 percent deduction but put limits on its use that would prevent wealthy developers from profiting from it. The House version would simply have reduced the rate at which pass-through income is taxed.
Republican leaders and Corker, who owns a real estate partnership in Tennessee, say the new loophole was not put in place to win over his vote. Corker has become more important because his party can afford to lose only two votes, and Sen. John Mccain, R-ariz., will be absent because of the aftereffects from his cancer treatment.
Republicans insist, further, that the provision was not “airdropped” — Corker’s term — into the tax bill during conference committee negotiations, and that its main purpose was to make sure pass-through businesses were not treated unfairly because corporations would be getting a big tax cut to 21 percent, from 35 percent now. Whatever the Republicans’ protestations, this malodorous loophole is further confirmation that congressional leaders are doing everything they can to maximize benefits for the wealthy at the expense of almost everybody else.
As for Trump, he has been going around saying the tax bill would “cost me a fortune” and his accountants “are going crazy now.” This claim has always been “fake news.” But with the new loophole it has become even more nonsensical. Having done nothing to drain the Washington swamp, the president now luxuriates in its warm waters.
All told, the 20 percent deduction for passthrough income would cost the government $414.5 billion in lost revenue over 10 years, according to Congress’s Joint Committee on Taxation. To put that number into context, it is about 29 times as much as the roughly $14 billion a year the federal government spends on the Children’s Health Insurance Program, which covers nearly 9 million kids from low-income families. Congress let authorization for that program lapse at the end of September.
The tax bill’s generosity toward real estate titans stands in stark contrast to its stinginess toward the average wage earner as well as its very real damage to taxpayers in highcost states. Average wage earners who would get modest tax cuts in the early years would see them evaporate into thin air after 2025. Homeowners and others in high-cost states like California, New Jersey and New York would see their once-sizable deductions for state and local taxes shrink to a maximum of $10,000 a year, which could in turn reduce home values. Further, the tax bill would permanently change how tax brackets are adjusted for inflation so that more people would be pushed into higher tax brackets over time even if they received only modest raises in salary.
Details aside, here in broad numbers is the bill’s impact 10 years from now, according to the Urban-brookings Tax Policy Center: Nearly 70 percent of families with incomes of between $54,700 and $93,200 a year would pay more in taxes than they would under current law. By contrast, 92 percent of families whose incomes put them in the top 0.1 percent of the country would get a tax cut averaging $206,280.
This bill is bad enough. No less revolting is the dishonest and sneaky way it was written.