The Editors: The G.O.P. tax plan is deliberately designed to collapse

Senate Majority Leader Mitch McConnell, R-Ky., answers a reporters question during a news conference Saturday, Dec. 2, 2017, in Louisville, Ky. The Senate passed the tax bill early Saturday morning with a 51-49 vote. (AP Photo/Timothy D. Easley)

Many senators raised concerns about rushing the legislative process for the Senate’s version of the Republican tax bill, exemplified by a barely legible handwritten amendment on an almost 500-page bill distributed only hours before the vote. But there are other parliamentary failures that have contributed even more greatly to the damage this bill will likely do: the misuse of the budget reconciliation process that allows for an expedited consideration of spending bills and the reliance on a 10-year budget score to determine eligibility for that process.

For poor and lower middle-class taxpayers, the bill will mean regressive tax hikes after a few years.

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While the bill would make a corporate tax rate cut permanent, tax cuts for individuals decrease over the 10-year budget window of the bill. For poor and lower middle-class taxpayers, the bill will mean regressive tax hikes after a few years. Republican lawmakers deserve blame for valuing the wishes of multinational companies above the needs of families, but they are not gleeful about phasing out tax cuts. That approach was necessitated by their (also blameworthy) decision to pass this bill through the reconciliation process that prevents a filibuster and prevents the need to win any Democratic votes.

The present bill is not the first time that the trick of sunsetting tax cuts has been employed. The most famous previous instances were George W. Bush’s tax cuts in 2001 and 2003, timed to expire in 2010 to avoid the “Byrd rule” prohibition on a reconciliation measure that increased the deficit beyond the budget window. In 2012, during the “fiscal cliff” and its related debt-ceiling showdowns, those tax cuts were made permanent for taxpayers making less than $400,000 ($450,000 for couples) but allowed to expire for those making more. While that episode was no more laudable than the present bill as a legislative endeavor, it at least resulted in a less regressive outcome than what the United States faces now.

The reconciliation process and the Byrd rule were originally designed to protect the budgetary process from legislative gamesmanship aimed at extraneous issues. It is now time to admit that they no longer serve that purpose; instead, they incentivize lawmakers to design legislative structures for deliberate and dangerous collapse before they reach those procedural limits. American politics has more than enough truly intractable problems without our legislators giving themselves artificial reasons to build in more.

Eliminating the reconciliation process or the Byrd rule likely would not have produced a morally better tax bill from the current Congress. Even the few reasonable ideas buried within the current bill, such as an increase to the standard deduction, are still outweighed by the focus on cutting taxes for the already wealthy. But we could have had a clearer debate both about the tax cuts themselves and their impact on the federal debt if they were not clouded by sunsetting provisions. The American people deserve to hear arguments about how to pay for what our lawmakers propose to do, not just how to smuggle a bad bill through Congress.

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J Cosgrove
2 months 1 week ago

How is the tax plan designed to collapse? Is it because there is a 10 year limit on the tax rates? That is kind of a stretch for the headline writer. It seems more like how can we write something to make Trump and Republicans look bad even if what they are doing is good.

Also without any specifics by the editors, this is an incoherent analysis at best. I would be interested in how the poor would be hurt by the current version of the tax bill. The answer is they are not so the editors will have to remain silent on anything specific that hurts the poor. The poor will actually be worse off without the tax legislation which is kind of ironic given the editorial or is there a better word than ironic for the editors' position?
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Let me suggest a more rational objection. How will the lower tax rates on business stimulate higher growth rates now that we are close to full employment? Will the expansion be due to excess capacity that business is currently not using? Or will there be inflation due to increased wages as business bid up wages? Or will there be both? Or something else?

Ask the Democrats why they are so unreasonable as to why these convoluted legislation things happen.

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Ellen B
2 months ago

How is it designed to collapse? Because the authors before it has even passed are talking about cuts to Medicare & Social Security to cover the tax cuts. Because the authors have included timelines for the tax cuts for the poor & middle class to phase out. Because the authors have included timelines for a mortgage deduction to phase out. They say to "trust them" that they won't let those deductions expire. Why trust them? The Republicans have been attacking Social Security since its inception. Corporate heads are already saying they aren't bringing jobs back but are planning to buy back stock & give better dividends (you can find that information in "radical" publications like the WSJ & Forbes).

"Trickle down" doesn't work. It has never worked. If you want to see the tax cuts on the 1% and businesses in action, look at Kansas. KS is drowning in debt at the moment. Moderate Republicans were elected in the fall --- running on increasing taxes! During this time the highway fund was raided to pay bills - so there's nothing left. Employee pensions were raided - that has to be paid back. Schools were underfunded & the state has lost court cases on this one (they did a bit of accounting flim-flam - they passed teacher pensions through the school account on their way to a different account so that the Republican state government could say that they did not change the amount of dollars they sent to schools). They cut the number of highway patrolmen. They cut the number of prison guards (some of the prisons have had riots the past couple of years now). We have dialysis clinics sitting unused because there aren't enough inspectors any more to inspect so they can be opened.... this is a big deal in a state with a lot of small communities. It means people who need dialysis can't go close to home - they have to drive hours away. We have hospitals closing in rural areas.

The Republicans are paying back their donors (such as the Kochs). There have already been reports that they were told to push through the tax cuts or they would not be funding their 2018 elections.

Don't blame the Dems for this one. Deficits only become important to Republicans when Dems are in power. That strategy was put in place years ago. However, any responsible person with a check book knows that you have to pay the bills... and this fiasco masquerading as a tax cut does anything but pay the bills.

Stuart Meisenzahl
2 months ago

Ellen B
See the comment below...
Historically Tax cuts with "ten year sunsets " are not cliffs off of which the poor or the middle class suddenly fall.
The Bush tax cuts were renewed at their expiration by bipartisan votes, even when the Democrats controlled both houses of Congress. The Bush Estate Tax cut was not renewed but modified. In sum: 82% of all the Bush tax cuts were repassed by bipartisan a vote!
.
As noted below , arcane filibuster/budget rules created by Democrats underlie the the need for ten year expirations. No one wants the cuts to expire.
In short your argument is that because a tax MIGHT expire in seven to 10 years that the poor and middle class should not get the benefits of any of those cuts for the next seven to ten years.
More importantly please Note: ALL the INDIVIDUAL tax cuts expire in seven years..... not just for the poor and middle class. Further during the next seven years the Alternative Minimum tax continues to apply to all of the types you decry as "rich"
The Corporate Tax does not expire in ten years and the need for a permanent significant cut in the corporate tax rate was recognized even by President Obama as far back as 2012!
Your statement on the mortgage deduction phasing out is wrong.. between 2018 and 2026 the cap on interest deductions for NEW mortgages is $750,000 rather than the current $1,000,000. That change is certainly not going to hit the poor or the middle class!!
I am sure that all kinds of issues, intended and unintended, will arise as the tax bill is implemented. But none of the ones you have identified are real issues. The CBO has already conceded that the deficits and National Debt will arise by $9 Trillion if no changes are made in taxes and spending. We either try to grow out of this problem or else!

Paula Pavanis
2 months 1 week ago

As a health care professional: With the cuts to the booming Medicare/Medicaid population, this boomer lay awake last night wondering if contained within those cuts is the current congress's sly way of killing off the boomers due to their interpretation of supposed "natural causes/selection." I for one have already been will continue to be without adequate health care at a time I am likely to need it the most. It seems like covert euthanasia for millions: a new trail of tears. This time it's all but the wealthiest of our elders.

ALFRED CHAVEZ
2 months 1 week ago

The most pernicious angle of this tax bill is that it is a set-up for cutting social security and, more importantly, Medicare and other socially needed programs. By ballooning the deficit the Republicans will have a ready-made excuse to cut spending programs. Paul Ryan has said as much. Perfidy.

Jim Lein
2 months 1 week ago

This is the main reason for the bill. Tax cut is just a snappy title. Cutting federal spending on socially needed programs and letting the states take over is having 50 smaller insurance pools that won't be able cover those most in need. Insurance needs the largest pool possible.
Let's face it: no one except a few super wealthy can afford to care for themselves as they age and become more dependent on others. You can't save enough. Wealthy families lose hundreds of thousands, millions in nursing home care--unless they scam the system. Which many do. The wealthy also rely on Medicaid big time. We need the largest possible public insurance pool. Let's admit this. States aren't big enough. Stop being scared by words like socialism. It's just the Gospel Jesus taught and urged us to follow years ago. There has to be some pooling of resources--or many, the majority will suffer. Profits can't be sucked out of every situation for a society to function. There are limits to capitalism. That's like the main message of the Bible: the love of money problem.

Lisa Weber
2 months 1 week ago

This tax bill is another step toward wealth inequality and oppression of those in the poor and middle classes. It is difficult to find anything good to say about it and impossible to list everything wrong with it.

The real shock to me about the Trump presidency is not that Trump is so awful, it is that the Republican party is so corrupt. The Trump presidency only makes the GOP corruption obvious. Shedding light on GOP corruption is perhaps the only positive aspect of the Trump administration.

Stuart Meisenzahl
2 months 1 week ago

Editors
Get a grip...the Bush tax cuts expired in 2010 but wereextended by Obama and a filibuster proof Democratic Congress until 2012 when Obama and Democratic Senate /Republican House made 82% of them permanent.
Your suggestion that there is a dangerous cliff in the Trump Tax bills and the poor and the middle class will fall off it in 10 years is simply unwarranted based on history.
The arcane nature of these tax passage procedures bear the name of their progenitor....."The Byrd Rule"...who I believe was a prominent democrat acclaimed for his parliamentary acumen and slight of hand. Of some interest the original distortion of this procedure was invented by another prominent Democrat-Russell Long of Louisiana
As for your distress with passing legislation via "Reconciliation", I have searched in vain to find the Editors opposing the passage of Obamacare using exactly the same procedure , replete with never before seen adaptations ,
Please a little balance!

Mike McDermott
2 months 1 week ago

Well said, Stuart. This America editorial is just another mindless piece of left wing hyperbole.

Maureen Elizabeth
2 months 1 week ago

Obamacare was not passed using reconciliation. It needed 60 votes in the Senate. ACA itself was the subject of about 15 months of discussions and negotiations in Congress.

Stuart Meisenzahl
2 months 1 week ago

Maureen
The Obamacare Bill was a conference bill that required passage by both the House and Senate.
There were not 60 votes in the Senate after Ted Kennedy died to pass the Conference Bill, so Reid used the Reconcilliation Process to escape the 60 vote requirement. If he waited until Newly elected Scott Brownarrived he would only have had 59 votes. Reconciliation had to be used before Dec 31.....hence the famous Christmas Eve vote!
In short Obamacare was passed by 59 votes in the Senate....when only 51 would have been required.

Joseph J Dunn
2 months 1 week ago

The Editors have their complaints about various specific features of both the House and Senate versions of the tax bill, and I have some complaints also. But the final complaint in this editorial, "The American people deserve to hear arguments about how to pay for what our lawmakers propose to do, not just how to smuggle a bad bill through Congress." is unfounded. The Senate and House bills have been dissected, graphed, charted and analyzed in numerous newspapers of every political flavor. Bishops have contributed their formal thoughts, more than once. America's Editors have entered the dialogue. The various changes that have been written into each version of the bill, including those handwritten notations the Editors decry, no doubt reflect input from various analyses, from voters, editorials, polls, etc. Let us also recall that "the trick of sunsetting tax cuts" have been used numerous times (as Editors acknowledge), and the likely effect of these sunsets in the present bills are part of the analyses offered, so no "trick" is involved here. So, the process is working, and no one has been denied their opportunity to hear arguments or express their thoughts. The Editors' strong inferences to the contrary are unfortunate.

Emmett Burke
2 months 1 week ago

I'm sorry but those who think the tax bill was debated are wrong. It was pushed through without debate by the Senate. Where was the testimony of experts? The Republicans gave the Congressional Office a few days to complete their analysis. And then when it showed at best a 1.5 trillion increase in the deficit, the Republicans attacked the Office. Even before the bill is passed the Republicans are saying that with the deficits there will have to be large cuts in entitlements.As an aside I notice that the negative comments on this editorial resort to name calling, or at best the application of what the commentators think are negatives, e.g., left wing . The thought apparently is that left wing is bad and presumptively right wing is good. Democrats are bad and Republicans are good. That us what Fox news conveys. They do it to establish a following that generates add revenue.
The question I ask is how is this tax bill good for America. It will create huge deficits that will lead to reductions in much needed entitlements. In the interim there will be increases in taxes for some poor and middle income people. And there will be an immediate reduction in health care for poor children.

Joseph J Dunn
2 months 1 week ago

Thank you for hearing (or reading) the arguments, and entering your views. I'm not sure which entity you are concerned has been rushed by Republicans, but the Joint Committee on Taxation (a creature of Congress) has been publishing reports more than once a week, the most recent being December 7th. The much-quoted Tax Policy Center (a non-profit joint venture of the Brookings Institute and Urban Institute, thus independent of Congress and its deadlines) has been publishing analyses also. Adding to the work of these experts are numerous others in many journals. Today's New York Times presents more, https://www.nytimes.com/2017/12/09/business/economy/tax-plans-may-give-…. I suspect that our legislators read at least some of all this, and the mail they get from constituents reacting to it. Thus my discomfort with the Editors' contention that the process is suffering from lack of argument.

Jim Lein
2 months 1 week ago

When Reagan cut taxes, there were months of hearings by elected officials, not just comments in the media. And there were adjustments made, in conjunction with democrats. This one was certainly rushed and pushed through by GOP reps and sens mainly because it was Republican, not because they knew all it contained or even because they agreed with all of it. It seems more about winning than doing something for the country. The GOP in congress seem like sheep, just going along.

Stuart Meisenzahl
2 months 1 week ago

Emmett
There is no cure for the deficits or the National Debt without addressing spending. The CBO has stated that if there were no changes in taxes or in the "built in rates of increase " in spending that the United States will accumulate over $9 Trillion in additional Debt , bringing the National Debt to over $30 Trillion in the next ten years. Note: that is the result with just a continuance of the status quo.
The Top 1% of US Taxpayers now have an aggregate wealth of just over $10 Trillion. If you seized all that wealth outright to pay for the National Debt , you could not even pay off half of that Debt. And consequently you would also be forgoing for the future the over 40% of total income taxes paid by those 1%ers for in the future: no assets= no income=No tax revenue!
There is no solution to this conundrum except to grow our way out of it in combination with tight controls on spending. We certainly can't tax our way out of it. While it is difficult at best to track the generation of growth from tax cuts, it is not all that difficult to show tax increases lead to slower growth.
The proposed tax bill is a small gamble that the Corporate Tax cuts will generate growth which will enhance tax revenue. I say small because the estimated $1 Trillion addition to the debt over 10'years is but 10% of what is already guaranteed growth in that debt as estimated by the same CBO.

ALFRED CHAVEZ
2 months 1 week ago

Conservatives repeat the "cut taxes, cut spending" mantra so often that they have duped significant portions of the population into believing it is true. It is not true. Trickle down economics has been disproved repeatedly.

Meanwhile, as noted above, conservatives scare everyone with cries of "socialism!" And significant portions of the population believe that exaggeration too. Unfortunately too many of those who are duped can ill afford this ungodly accumulation of wealth by the already wealthy.

Stuart Meisenzahl
2 months 1 week ago

Alfred
Go right ahead...confiscate it all and see what you have in three years......Venezuela!

Maureen Elizabeth
2 months 1 week ago

No one is suggesting confiscating everything. Corporations account for a much smaller share of the tax revenue pie than they used to. In 1952, corporations accounted for 32.1 percent of federal revenue. As of 2013, it was less than 10 percent. Individual contributions have stayed steady.

Stuart Meisenzahl
2 months 1 week ago

Maureen
the context is clear: IF YOU DID CONFISCATE EVERY THING THE 1%ers have , you could not even eliminate 1/2 of the current National Debt of $20Trillion! Increasing taxes without spending controls (see Mr Chavez comment) accomplishes even less! Bear in mind that The CBO has stated that with no changes in the tax laws and no changes in spending that in ten years the National Debt will be $29+ Trillion!!
The percentage of total taxes paid by corporations has declined for two reasons: The total absolute amount paid by individuals have gone up more while the business of corporations has been shifted offshore to lower their US taxes.

Jim Lein
2 months 1 week ago

Did you see the numbers Maureen mentioned? In 1952 corporation taxes covered 32.1 % of the federal budget; in 2013 they covered less than 10 percent. That decrease is significant. From the early 1940s to the early 1960s tax rates on the top bracket were in the 90% range, the highest at 94 %, 19 out of 20 years in the 90s, one year in the 80s. We paid off some war bills, funded the GI Bill which largely created the middle class we are losing, and built our freeway system we are unable to maintain. How did we do that then? Taxes were a main reason. The wealthy then were more patriotic, more ready to do their part. They were part of the Greatest Generation. Our wealthiest seem like the Greedy Generation.

Stuart Meisenzahl
2 months 1 week ago

Jim
A huge percentage of what was taxed in the early 1950s as "corporate income" is taxed today as personal income courtesy of the gigantic expansion of subchapter S and limited liability companies in which all income is passed directly to the business owners where it is taxed at the individual rate. The result is a simultaneous increase in personal income tax revenues and a decrease in corporate tax receipts !.... Add to that the movement offshore of standard "C Corporations" ( those taxed at at the Corporate rate) and there are huge swings swings in percentages attributable to corporate rate revenue and individual rates. Approximately 90%+ of all businesses in the US are now these "pass through companies"...taxed at the individual rate.

If you doubt this, I refer you to the recent uproar in the Republican discussions over the fact that the tax bill reduces the corporate rate but was not providing equal relief to the "pass through companies" (partnerships , sub S corps and Limited liability companies) The reluctance to reduce the rate on "pass through businesses " was very simple......it took away too much revenue.

Joseph J Dunn
2 months ago

Some reality checks:

Limitations of an economy based on housing, highways and high taxes were becoming apparent by the late 1950s. President Kennedy’s inauguration took place in the midst of the fourth recession since the end of the war, with the unemployment rate that month at 7.7 percent—the highest rate since the end of World War II.

The nation’s poverty rate in 1959 was 22 percent. For African-Americans, it was a staggering 55 percent. Michael Harrington’s The Other America, which appeared in 1962, described an America mired in poverty and inequality.

Unions barred minorities from apprenticeships that led to the skilled labor jobs. Women were routinely kept from the professions and from “men’s work” occupations, until well into the 1970s. If you were white and male, you had exclusive claim to most of the available jobs.

Manufacturing offered so little after-tax return on investment that few firms bothered to replace obsolete machinery or invest in new buildings or equipment. In the 1950s and -60s, Warren Buffett was able to buy manufacturing firms at a purchase price less than the company’s net asset value, and sometimes for less than the amount of cash in the company’s bank accounts, according to his authorized biography "The Snowball."

In 1976, presidential candidate Jimmy Carter proposed adding the inflation rate to the unemployment rate to calculate the “misery index.” That year the misery index was 12.5 percent. In 1980 it was in excess of 20 percent, with inflation was at 13.5 percent and unemployment at 7 percent, and unemployment had been stubbornly high for six years. The former heartland of American industry had become known as the Rust Belt.

Economist Angus Deaton shows in his book “The Great Escape” that income inequality started to increase in the mid-1970s—not 1980 or 1981. Stanford University professor Alexander J. Field writes in “A Great Leap Forward” that the strong post-war GDP numbers were driven by technologies developed in the 1920s and early -30s meeting pent up demand after years of Depression and war. Field agrees that this extraordinary growth fizzled in the 1970s.

Thomas Farrelly
2 months ago

There are valid criticisms of the bill, but the expirations under the Byrd rule are highly unlikely to happen. (The Byrd rule should certainly be done away with.) It is a shame that America is incapable of a sober assessment of this bill, and simply offers the same emotional and extreme partisan expressions as Schumer and Pelosi. Fortunately, there are far better analyses available. One can start with today's WSJ.

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