The Senate Tax Plan

This is part two of my two part series on taxes. This post was originally the second half of a post on taxes overall, but I split it off into it’s own because the whole thing was getting too long. Now, this post focuses on the bill that was just signed by our president and why I oppose it, why I believe that I should pay more taxes than those less fortunate than I am, and why I have an expectation that those wealthier than I am should pay more than I do. The other post, which you can find here, goes into what I believe a progressive tax system should look like, and ultimately the reason we all need to pay those taxes.

Let’s start off by talking about the ridiculous way this bill was passed. Republicans in the senate moved so quickly on their initial vote that senators didn’t receive a final copy of the 479 page bill to review until a couple of hours before the vote took place, and I use final there loosely.

The republicans in the Senate were making handwritten edits to already handwritten edits of the bill they voted on, some of them in pencil, right up until the vote. Some of those edits were illegible.

A motion to slow down, properly type things up, and give people the weekend to read the new bill was voted down along party lines.

Consider how crazy that is for a moment. The republicans in the senate passed a supposedly sweeping overhaul of our taxation system even though it was partially written in pencil, at least some of it was illegible, and the entire senate had less than half a day to read the bill before the vote occurred. These are the same republicans that were upset with the “rush” on the Affordable Care Act because they wanted people to have more time to read it and debate it, but let’s take a closer look at the timeline of the ACA.

The first draft of the ACA went into committee around 6 months before the final vote, and a minimum of a month passed between each edit of the bill and the next vote on it in either house. There were 25 days of debate and voting on proposed amendments from both sides of the aisle. More than 100 amendments proposed by Republicans were ultimately passed. Here are two quotes from Republican leadership at the time:

“This massive piece of legislation that seeks to restructure one-sixth of our economy is being written behind closed doors without input from anyone in an effort to jam it past not just the Senate but the American people before Christmas.”

– Mitch McConnell, Dec. 18, 2009
~3 months before the ACA passed

“I don’t think we should pass bills that we haven’t read and we don’t know what they cost. You rush this thing through before anyone knows what it is, that’s not good democracy, that’s not doing work for our constituents.”

– Paul Ryan, July 29, 2009
~8 months before the ACA passed

Now, the first draft of the republican tax plan went into committee 7 weeks before it was ultimately passed. The house passed their first version of it 2 weeks later. 2 weeks later, on the afternoon of the senate’s first vote, a new version of the bill was distributed to senators with amendments made by outside lobbyist groups. Democrats proposed many amendments, but only a single democratic amendment was passed. It removed an earmark for a specific private school that Secretary of Education Betsy DeVos has an investment stake in. Two weeks later, now one week before the final senate vote, the updated text was released with the handwritten amendments typed up appropriately. Can you guess how Republican leadership feels about the way this tax reform bill was passed?

“You complain about process when you’re losing.”

– Mitch McConnell, Dec. 1, 2017
The day the senate received and voted on their tax bill

There you have it folks. Eight years ago, six months wasn’t enough time to fully understand a bill. 25 days of open debate and amendments, with many republican amendments making it into the bill, was too partisan — republicans were shut out of the process and didn’t get to have their voices heard. Today, though, seven weeks is more than enough time to understand and consider a massive bill. Releasing an updated bill and expecting a vote mere hours later with less than a single day of open debate and discussion is acceptable, and democrats are only complaining about the process because it wasn’t their tax plan; they were just sore losers.

That’s my issue with how this bill was passed. Republicans seemed to want to get this signed and through as fast as they could. This is conjecture on my part, and I may be a bit too cynical, but I feel like the reasoning for that was a mixture of a few things. Part of it was racing to pass this ahead of Doug Jones taking his seat. They were counting on Luther Strange’s support for it because after he leaves office, they’d need to either convince all but one of their side of the aisle in the Senate, or face needing to be bipartisan enough to convince at least one democrat to vote with with them. Another part of it was wanting to get Trump’s first legislative victory in before the first year of his presidency ended. The third part of it was that they wanted it passed before the full analysis of the cost of the bill could be fully understood and start spreading to the public. Lastly, part of it was wanting to have it passed before the recess, so republicans wouldn’t have to face town halls with their angry constituents, which is what sunk their efforts to pass their health care bill.

Let’s talk about what’s wrong with the bill itself. I mentioned this in my previous post, but i’ll mention it again here for complete transparency. As it stands, this bill is going to start off by giving me and my family around $5000 more back in a tax refund than I would’ve gotten without it. That money is going to help us out a ton, as I’m sure the lowered rate will help out many families across the country. You can find out roughly what you’ll save at first here. So yes, I personally benefit from this bill, but that doesn’t mean I can ignore the bad about the bill and how it’s ultimately going to do more harm than good, and neither should you.

The biggest issue I have with this bill is likely obvious. Beginning in 2019, it effectively  removes the individual mandate for health insurance that the Affordable Care Act put in place. I don’t fully support the ACA, because I don’t think it went far enough, but I recognize it was a step in the right direction. This change removes a key aspect of how it was paid for. Insurance as a whole is a socialist construct. Insurance is designed to spread the cost of expensive things, like car accidents, illnesses, or damage to houses, around to as many people as possible so no one is ruined by something outside of their control. The individual mandate was meant to ensure that young, healthy people paid into the insurance market to subsidize the cost of the care for the elderly and chronically ill. The effect of this is far from being an “Obamacare Killer” as our president has claimed, but scenarios being predicted without the mandate in place say that more than 10 million people will lose their health insurance over the next decade as insurers abandon markets that aren’t profitable anymore, mostly in lower to middle class, rural areas populated with Trump voters. Once again, they’re going to get the brunt of the blow from this, and once again private enterprise is going to fail to properly care for those in need.

Another big issue I have is that this bill disproportionately favors the wealthy over the long term. I’ve seen a handful of conservative people say something along the lines of, “Well, of course it does. It cuts taxes for the American people and the wealthy already pay more in taxes so they’re going to get more back. We’re all getting something.” That’s pretty disingenuous, though. Firstly, in 2018, 23% of the tax savings go to the top 1% of income earners. The tax bill could’ve easily been written in a way that very rich weren’t affected at all or were affected at a much lower rate, giving more to those in the lower to middle class that have a much bigger need for it. Secondly, the savings for the top 1% gradually increases to 83% of the total savings By 2027, overwhelmingly favoring the super rich. In the long term, my taxes go up more than they were already going to, as they will for most of the people outside of the very top.

For now, though, my taxes do go down somewhat significantly. $5000 in that first year comes out to just under $100 per week in extra spending money. But the average savings for an American household is only $1,182, or about $22.75 per week. Donald Trump, however, is looking to save as much as $11,000,000 in that first year from a single piece of the tax bill that benefits his real estate holdings. That’s about $211,538.50 per week, or more than $30,000 per day, every day. That’s before we get to the loophole benefiting President Trump through his golf courses (He owns at least 19) that Republicans left untouched while deductions for mortgage interest, property taxes, and state/local taxes are reduced or removed altogether to help “pay for this bill”. No wonder he was in such a hurry to sign this. That’s the kind of payday that large corporations and the super wealthy are seeing as a result of this tax bill. They’re pulling in additional income that comes out to more than the yearly salary of the average American household every 3 days, while that typical family is tossed a decent cheeseburger in the same time period, and the bill is set up to widen that gap over time, giving more of the dollars to those at the top. That cheeseburger is nothing more than a distraction to try and make us either miss or ignore the massive handouts being given to those least in need of them by getting us to think, “Hey, I got mine, too.”

The last issue I’ll go into for now is that this bill ultimately looks like it’s going to increase the deficit by upwards of $1,400,000,000,000 (that’s $1.4 trillion) over the next 10 years. That’s an average deficit increase of $140 billion per year. This is from the party that calls themselves fiscally conservative. Conservatives just ballooned the deficit by ~20% and now they’re flipping their focus to “entitlement reform”. Suddenly, the deficit is going to matter, and we’ll have to cut holes in the social safety net to balance the budget. We’re going to hear that we need to stop giving handouts to the lazy poor people that don’t want to work because the nation’s debt is spiraling out of control and we need to rein it in. I really hope I’m wrong about this, but I’ll be really surprised if I am.

I don’t think I’m ultimately asking for anything too outrageous. The percentage of their income that wealthy individuals and corporations pay in taxes should be greater than or equal to the percentage that I pay. The percentage of my income that I pay in taxes should be greater than or equal to the percentage those that make less than I do pay. There are good arguments for and against the progressive system we sort of kind of have now, where rates go up as income goes up. The same could be said for flat tax systems.

I support the progressive system. The wealthier you are, the more strain you’re going to put on public services and infrastructure. Here’s a simple example: a person that makes minimum wage at a job they take a bus to and from isn’t burning as much fuel or contributing as much wear and tear to the pavement as I am driving myself in my car to and from work. My numbers are much less than someone who owns a local business and has goods shipped to their store. The police are protecting at least a home and a storefront for them, a single home for me, and a studio apartment in a building with 15 other apartments for the minimum wage worker. The amount we each pay for those things should reflect the use we get out of them.

A regressive system, where the wealthier you are, the lower your percentage is, doesn’t really make sense, but that’s essentially what we really have thanks to the lower capital gains tax rates. Mitt Romney had a lower effective tax rate on his $40+ million income than I did when I was still making a 5-figure salary. Donald Trump paid absolutely nothing in taxes in 2005, which is the only year we know about; my effective tax rate was higher and I was working at a Wendy’s at the time.

I’d prefer a system where capital gains tax rates are equivalent to income tax rates, but if one is going to be higher than the other, shouldn’t it be the other way around? General income is money worked for. You put in time, effort, and sweat and you’re paid for that work. It’s money built on the backs of workers striving for the American Dream. Capital gains ultimately boil down to successful gambling. I don’t mean to diminish it — making money gambling or investing takes a lot of skill, but it also takes a lot of luck. The best black jack player in the world is going to lose sometimes. Capital gains don’t come directly from your hard work. You’re putting your faith in someone else’s hard work, or at least your financial counselor is. If it pays off, great! But why do you deserve a bigger windfall than the person you bet on who put in all the work? That doesn’t sound very American to me.

Thanks for stopping by.

-Malcolm