Tax cut’s true costs
Three Republican defections could kill the tax bill being considered by the Senate this week, and three times that many GOP senators have yet to commit to the legislation. On one side of the men and women in the middle are a party and president desperate for a political victory that would please wealthy and conservative interests. On the other is the public’s accurate perception that it wouldn’t be a victory for many Americans.
The bill would help those earning more than $75,000 a year and hurt those earning less, according to a new analysis by the nonpartisan Congressional Budget Office. The greatest costs over a decade would be to those with incomes under $30,000, while the biggest benefits would go to those earning more than $1 million. And the federal government would end up $1.4 trillion poorer.
Most of the costs to lower-income taxpayers would come from the bill’s repeal of the mandate to obtain health insurance, a pillar of the Affordable Care Act. The CBO expects the uninsured population to expand by 13 million as a result, reducing spending on subsidized insurance for those of modest means.
While the bill would reduce taxes for most, the bulk of the benefits would go to higher-income households. The greatest rewards for individual taxpayers — and costs for the government — would come from modifying income tax brackets, increasing standard deductions, ending the alternative minimum tax and reducing the burden on so-called pass-through income from businesses.
As a result, the CBO analysis found, Americans earning more than $100,000 would reap about $18 billion in gains from the legislation in 2027. Those earning less than $40,000, by contrast, would absorb more than $50 billion in expenses.
That reality has not eluded the public. A recent Quinnipiac University poll found that voters disapprove of the Republican tax cut plans 2 to 1, with only 25 percent favoring the effort and 52 percent opposed. Sixty-one percent said they believe the legislation would largely benefit the rich.
Because the House has already passed a tax bill, Senate approval would trigger formation of a committee to draft compromise legislation. Matters up for negotiation would include a dubious House provision freeing churches to engage in political activity, a reduction of the top tax rate and raising of the bottom, and limits on deductions for mortgage interest and state and local taxes, both of which are particularly valuable to high-tax, high-cost states such as California.
What seems unlikely to change, unfortunately, is the effort to confer advantages on those already enjoying them at the expense of those who don’t.