Two Truisms Of Current Republican Economics

There are a couple of truisms that apply to today's Republican Party.

1. Republicans love rich people and don't care about other Americans.

2. Republicans love to whine about the national debt, but don't really care about it.

If you doubt that, congressional Republicans are preparing to prove it.

Other than giving Trump what he wants, the congressional Republicans have only one things they believe in enough to pass - reauthorizing the Trump tax cuts ((which are soon going to expire). 

These cuts primarily benefitted the rich when they were passed a few years ago, and it will be the same this time. At least half of the tax cuts will go to the richest 5% of Americans, while the other 95% will have to divide up the rest.

They don't seem to care that it is estimated that passing these tax cuts for the rich will balloon the national debt by $4 to $6 trillion dollars. That's the same national debt that they whined was too large when a Democrat was in the White House.

There are two ways to lower the national debt - raise taxes or cut benefits. We know they won't raise taxes because they are preparing to cut them again (especially for the rich). They claim they will cut government spending to offset the deficit cutting taxes will do.

Where will the cuts happen. It won't be the government giveaways to the rich and corporations. No! Instead, the cuts will be to the help the poor, the working class, and the lower middle class get. Unlike millionaires and billionaires, these people actually need the government help they get. Unfortunately, the Republicans don't care. They will cut help for people who need it so they can give more to the rich.

And those cuts will not be enough to offset the massive tax cut for the rich. The national debt will be ballooned.

To be blunt, today's Republicans love the rich (and no one else) and don't care about the national debt. Their own actions prove that to be true! 

"Leprechaun Economics" And The Failure Of 2017 Tax Cut

When Republicans passed the 2017 tax cut, which lowered the corporate tax rate to 21%, they promised that it would bring corporations back to America (which would create new jobs and raise worker wages). None of that happened.

Nobel Prize economist Paul Krugman explains why in his New York Times column:

In the summer of 2016, Ireland’s Central Statistical Office reported something astonishing: The small nation’s gross domestic product had risen 26 percent in the previous year (a number that would later be revised upward). It would have been an amazing achievement if the growth had actually happened.

But it hadn’t, as government officials acknowledged from the beginning. It was, instead, an illusion created by corporate tax games. At the time, I dubbed it “leprechaun economics,” a coinage that has stuck; luckily, the Irish have a sense of humor about themselves.

What really happened? Ireland is a tax haven, with a very low tax rate on corporate profits. This gives multinational corporations an incentive to create Irish subsidiaries, then use creative accounting to ensure that a large share of their reported global profits accrue to those subsidiaries.

In 2015 a few big companies appear to have gotten even more aggressive about their profit-shifting, which led to a surge in the value of production they reported doing in Ireland — a surge that didn’t correspond to anything real.

To understand the big corporate tax reform proposed by the Biden administration, what you need to know is that it’s all about the leprechauns.

One way to think about the huge corporate tax cut Republicans rammed through in 2017 is that its underlying premise was that the leprechauns were real. That is, the tax cut’s architects insisted that corporations had been moving operations abroad to avoid U.S. taxes, and that slashing those taxes would bring millions of jobs back home.

It didn’t happen. In fact, the tax cut had no visible effect on business investment, probably because it was addressing a fake problem. U.S. corporations hadn’t been moving jobs overseas to avoid taxes; they had just been avoiding taxes.

The true impact — or actually lack of impact — of profit taxes on business decisions becomes obvious if you look at where corporations report big overseas earnings.

If they were truly responding to taxes by making large foreign investments that eliminated American jobs, we’d expect to see a lot of their profits coming from major production centers like Germany or China. Instead, more than half of the profits U.S. corporations report from overseas investments come from tiny tax havens, including places like Bermuda and the Cayman Islands where they have no real business at all.

By the way, this isn’t just an American problem. The International Monetary Fund estimates that about 40 percent of the world’s foreign direct investment — basically corporate cross-border investment, as opposed to “portfolio” purchases of stocks and bonds — is “phantom” investment, accounting fictions set up to avoid taxes. That’s why on paper Luxembourg, with just 600,000 people, hosts more foreign investment than the United States does.

So the real problem with U.S. corporate tax policy isn’t loss of jobs, it’s loss of revenue — and the Trump tax cut made that problem worse.

For the most part the Biden administration’s Made in America Tax Plan is an effort to reclaim the revenue lost both as a result of profit-shifting and as a result of the Trump tax cut, in order to help pay for large-scale public investment.

As the plan’s name suggests, the administration’s experts — at this point it’s hard to find a tax expert who hasn’t joined the Biden team — do believe that there are aspects of the U.S. tax code that have created an incentive to move jobs abroad. But they see the problem as the consequence of details of the tax code rather than the overall burden of taxation.

And while they believe that tax reform can improve incentives to invest in America, the main focus of the plan — even of things like the proposal for a 21 percent minimum tax rate on overseas profits, emphasized by Janet Yellen, the Treasury secretary — isn’t on these incentives so much as on increasing revenue from the corporate profits tax, which falls mainly on the wealthy and on foreigners, and is at a historical low as a percentage of G.D.P.

What about warnings from corporate groups that raising taxes on corporations would have dire economic consequences? Well, they would say that, wouldn’t they? And if raising taxes would have such a negative effect, why did cutting taxes fail to produce any visible positive results?

The corporate tax plan, then, looks like a really good idea. In part that’s because President Biden, unlike his predecessor, has hired people who know what they’re talking about. And it also marks a welcome break with the ideology that says that the only way we can help American workers is indirect action: cutting taxes on corporations and the wealthy in the hope that they’ll somehow deliver a pot of gold at the end of the rainbow.

What the Biden team seems to have concluded, instead, is that the way to create jobs is to create jobs, mainly through public investment, rather than by chasing unicorns and leprechauns. To the (partial) extent that direct job creation must be paid for with new taxes, the new taxes should be imposed on those who can afford to pay.

Refreshing, isn’t it?

The GOP Is Raising Taxes On Everyone But The Rich

Remember the 2017 Republican tax cut -- the one that they called a "middle class tax cut"? As you surely know by now, most of those tax cuts went to the rich and corporations (over 80%). The middle class only got a tiny cut, and the working class got nothing. Well, it's about to get even worse!

There was a hidden part of that bill that starts to raise taxes on everyone (except for the rich) in 2021, and will keep raising those taxes every two years until 2027. By 2027, three-quarters of the population will be paying more taxes than before the cut. But the other quarter, those making over $100k, will get to keep their cuts.

The bill was never fair for most Americans, and now it will get even more unfair.

Here's part of how economics professor Joseph Stiglitz explains it in The New York Times:

The Trump administration has a dirty little secret: It’s not just planning to increase taxes on most Americans. The increase has already been signed, sealed and delivered, buried in the pages of the 2017 Tax Cuts and Jobs Act.

President Trump and his congressional allies hoodwinked us. The law they passed initially lowered taxes for most Americans, but it built in automatic, stepped tax increases every two years that begin in 2021 and that by 2027 would affect nearly everyone but people at the top of the economic hierarchy. All taxpayer income groups with incomes of $75,000 and under — that’s about 65 percent of taxpayers — will face a higher tax rate in 2027 than in 2019.

For most, in fact, it’s a delayed tax increase dressed up as a tax cut. How many times have you heard Trump and his allies mention that? They surmised — correctly, so far — that if they waited to add the tax increases until after the 2020 election, few of the people most affected were likely to remember who was responsible.

Looking at the analyses of the nonpartisan Congressional Budget Office and the Joint Committee on Taxation at the time the December 2017 tax bill was enacted, we see very clearly how different income groups are affected by the Trump tax plan. And it’s disturbing.

The current poverty line for a family of four is $26,200: People with incomes between $10,000 and $30,000 — nearly one-quarter of Americans — are among those scheduled to pay a higher average tax rate in 2021 than in years before the tax “cut” was passed. The C.B.O. and Joint Committee estimated that those with an income of $20,000 to $30,000 would owe an extra $365 next year — these are people who are struggling just to pay rent and put food on the table.

Of course, the poor have never mattered much to the Republican Party, but those on the edge of poverty have been particularly hard hit by the pandemic and the recession it has caused, so Trump’s planned tax increases seem especially heartless, and impractical, when you consider that their higher tax payments, while a huge burden for them, will add little to the budget.

By 2027, when the law’s provisions are set to be fully enacted, with the stealth tax increases complete, the country will be neatly divided into two groups: Those making over $100,000 will on average get a tax cut. Those earning under $100,000 — an income bracket encompassing three-quarters of taxpayers — will not.

Most People Say The Trump/GOP Tax Cuts Won't Help Them

Trump, and GOP congressmen, claimed the tax cuts they passed would benefit most Americans. It has not worked out that way. While the rich (and corporations) will see big tax savings, that is not true of everyone. In fact, most people say they will either pay more or pay the same.

This is why the Republicans did not campaign on their tax cuts in the 2018 election, and won't campaign on them in 2020 either. They know the tax cut has backfired on them.

The chart above is from a new NBC News / Wall Street Journal Poll -- done between March 23rd and 27th of a national sample, with a 3.1 point margin of error.

Trump/GOP Tax Cuts Did Not Fulfill Its Promises

(Cartoon image is by Mike Keefe in The Denver Post.)

The tax cuts passed by congressional Republicans and signed by Donald Trump was touted by them as a benefit to the middle class. But the biggest cuts benefitted the rich, and the biggest cuts of all went to corporations. Trump told us that those corporations would use the cuts to expand investment and create a massive number of new jobs. That did not happen. Instead, most of the corporations used that money to buy back their own stock (raising stock prices, which only benefitted the company executives and stockholders). Here's what Rueters reports really happened:

The Trump administration's $1.5 trillion tax cut package appeared to have no major impact on businesses' capital investment or hiring plans, according to a survey released a year after the biggest overhaul of the tax code in more than 30 years.

The National Association of Business Economics' quarterly business conditions poll, published on Monday, found that while some companies reported accelerating investments because of lower corporate taxes, 84 percent of respondents said they had not changed plans. That compares to 81 percent in the previous survey published in October.

The White House had predicted that the massive fiscal stimulus package, marked by the reduction in the corporate tax rate to 21 percent from 35 percent, would boost business spending and job growth. The tax cuts came into effect in January 2018.

"A large majority of respondents, 84 percent, indicate that one year after its passage, the corporate tax reform has not caused their firms to change hiring or investment plans," said NABE President Kevin Swift. . . .

The NABE survey also suggested a further slowdown in business spending after moderating sharply in the third quarter of 2018. The survey's measure of capital spending fell in January to its lowest level since July 2017. Expectations for capital spending for the next three months also weakened.

"Fewer firms increased capital spending compared to the October survey responses, but the cutback appeared to be concentrated more in structures than in information and communication technology investments," said Swift, who is also chief economist at the American Chemistry Council.

According to the survey, employment growth improved modestly in the fourth quarter of 2018 compared to the third quarter. Just over one-third of respondents reported rising employment at their firms over the past three months, up from 31 percent in the October survey. The survey's forward-looking measure of employment slipped to 25 in January from 29 in October.

Most Americans Getting Nothing From New GOP Tax Law

Here is more proof that the new Trump/Republican tax law is not going to be the big help the GOP was hoping it would be in the coming election. They had told Americans that they would get a tax cut from the new law, and they would see it on their paychecks starting in February. That was a lie.

April is now nearly over, and only 22% of workers say they have noticed even a small increase on their paychecks. A majority of 55% say they have received nothing! And the numbers are similar for every demographic group (even Republicans).

But these people are seeing in the news that the rich and corporations are getting millions/billions in tax savings, and they are starting to realize they have been conned and lied to by Trump and the Republicans.

This chart was made using information in a new Morning Consult / Politico Poll -- done between April 19th and 23rd of a random national sample of 1,993 registered voters, with a 2 point margin of error.

Corporations Have NOT Shared Their Tax Cuts With Workers

The following is part of an op-ed in USA Today by multi-millionaire venture capitalist Nick Hanauer. He is one of the few one-percenters who will tell you the truth about the Trump/GOP tax cuts (and the "trickle-down" economic lie).

In selling you their trickle-down tax plan, President Trump and congressional Republicans promised you a $4,000 pay raise. 

"This change, along with a lower business tax rate, would likely give the typical American household around a $4,000 pay raise," Trump said in October.

“At least $4,000,” House Speaker Paul Ryan emphasized in a post on his official website. 

So now that rich people like me have gotten our billions of dollars in tax cuts, you might be wondering where your $4,000 raise is.

Spoiler alert: You’re not getting one.

Take it from someone who has helped run three dozen companies: Businesses don’t give raises because they can. Businesses give raises when they have to. They give raises when they fear losing employees to a competitor, or when the government requires them to through minimum wage laws. But businesses don’t give raises just because they got a tax cut. Businesses pay you what you can negotiate. And few employees in today’s economy have the leverage to negotiate.

So that $4,000 raise Republicans talked about to sell their tax cuts? It was just a trickle-down lie. For decades, trickle-downers have relentlessly promised that if the government cut taxes on corporations and rich people like me, our windfall profits would eventually trickle down to everyday Americans in the form of higher incomes and more jobs. “A rising tide lifts all boats,” they tell you. But the truth is, these trickle-down policies do nothing but make the rich richer.

So that $4,000 raise Republicans talked about to sell their tax cuts? It was just a trickle-down lie. For decades, trickle-downers have relentlessly promised that if the government cut taxes on corporations and rich people like me, our windfall profits would eventually trickle down to everyday Americans in the form of higher incomes and more jobs. “A rising tide lifts all boats,” they tell you. But the truth is, these trickle-down policies do nothing but make the rich richer. . . .

According to the Academic-Industry Research Network, S&P 500 companies announced $158 billion in stock buybacks in the weeks following the tax cuts, compared with $3.7 billion in one-time bonuses and only $1.5 billion in annual wage increases.

So much for that rising tide.

Here’s the reality: If Trump wanted to give you a raise, he wouldn’t rely on trickle-down lies to do it. A mere $2 increase in the minimum wage would give millions of hardworking Americans a $4,000 raise. A modest updating of our overtime regulations would give a $4,000 raise to tens of millions more.

And of course, if Trump really wanted to put $4,000 in Americans’ pockets, he could have instead given those trillions of dollars in tax cuts directly to people like you, instead of giving them to your boss.

Take it from a successful businessman: Your boss isn’t going to give you a $4,000 raise. And here’s the thing: You can’t fire your boss. But you can fire all those lying politicians who promised you a $4,000 raise. And the best news is, you can do it as soon as November.

Trump Tax Cut Being Exposed As Giveaway To Corporations

(Cartoon image is by Jimmy Margulies at jimmymargulies.com.)

When the Trump/GOP tax cut was being debated in Congress, it was hailed by Trump (and his Republican cohorts) as benefitting mostly the middle class. That is now being exposed for the LIE that it always was.

Trump said corporations (who got the biggest tax cuts of all) would use those cuts to raise wages for workers and create a massive number of new jobs. That is not happening. Job creation is rocking along at the same pace it was before the cuts, and while a few companies gave a one-time bonus to some employees, workers are still struggling to keep up with inflation.

Here's just some of what Derek Thompson said about the effect of the cuts in The Atlantic:

The most basic criticism of the GOP’s tax cut was that the boons for corporations and their shareholders would far outweigh the benefits for ordinary workers. That’s exactly what seems to be happening. Stock buybacks announced between January 1st and February 15th reached historically high levels, totaling about $170 billion in that period. That’s 28 times larger than the total value of end-of-year bonuses that were credited to the corporate tax bill—some of which had been announced months earlier and had nothing to do with the tax cuts. Companies might be advertising new bonuses. But they’re quietly reaping the benefits of higher profits.

Only A Quarter Of Americans Have Seen More In Paychecks

When the new tax law was passed,  Trump and the congressional Republicans told Americans that it was a law that mainly benefitted the missile class -- and most Americans would see more money in their paychecks as a result of the new law. That has simply not happened.

The chart above shows the results of a new Politico / Morning Consult Poll -- done between February 15th and 19th of a random national sample of 1,989 registered voters, with a margin of error of only 2 points.

The poll shows that only about 25% of Americans have actually seen an increase in their paychecks due to less tax being deducted from it. The poll didn't ask how much more that 25% saw, but you can bet it was far less than the huge tax cuts the rich and corporations got out of the new law. I suspect for most it was just a pittance.

This was the law the Republicans were counting on to save them in the 2018 elections. I don't think it will do that -- especially since we are also not seeing the massive creation of new jobs that were also promised. I think the middle and working classes will understand that they were once again conned by the Republicans.

The Republicans made promises to the middle class, but delivered only to the rich and corporations. They should be punished for that in November.

Trump And His Tax Plan Are Equally Unpopular

For all the spinning and posturing there remains a fundamental challenge for the Republicans: the tax bill won’t become more popular unless the president becomes more popular.

In fact, if you look at national support for the tax legislation, you will see that it lines up almost exactly with voters’ overall perception of the president.

In other words, if you like the president, you like the tax reform legislation. If you don’t like Trump, you either don’t like the bill or you are undecided about it. It is a reminder that whatever the president touches carries his polarizing brand.

Even as voters are overwhelmingly positive about the economy, it doesn’t translate to their opinions of the president or the tax law.

The chart and the quote above are from the Cook Political Report. It seems that the Republicans new tax law is as unpopular as their president. That's not good for them. They were counting on that tax law to save them in the coming election.

That means their prospects in the coming election are still tied to Donald Trump -- and Trump is the most unpopular president since World War II. Can he change that perception? I doubt it. The people don't like his agenda, and they don't trust him (don't think he is honest).

There Is Still No Widespread Support For The New Tax Law

The Republicans knew their tax law was not popular with the public when they passed it. They were just hoping they could change public opinion once it was law. But so far, that has not happened. In this new survey, 46% disapprove while 37% approve. People are still convinced that the law mainly benefits the corporations and the rich -- not the middle class.

The chart below shows demographic support/opposition to the new tax law.

These charts were made using information in a new Pew Research Center survey -- done between January 10th and 15th of a random national sample of 1,503 adults, with a margin of error of 2.9 points.

Americans Still Don't Like The New Trump/GOP Tax Plan

Republicans remain convinced that they did a good thing in passing the new tax law (which gives massive tax cuts to the rich and to corporations). And they think that when Americans see the tiny cut in their own pay checks, they'll also like the law. Well, they have a long way to go to convince Americans.

Two new polls show that Americans still don't like the new law. They know it mainly benefits the rich, and they don't like that. They wanted a tax cut, but they wanted one that mainly benefitted the middle class. That's not what the Republicans delivered.

The Quinnipiac University Poll was done between January 5th and 9th of a random national sample of 1,106 voters, and has a margin of error of 3.6 points.

The Gallup Poll was done between January 2nd and 7th of a random national sample of 1,024 adults, with a margin of error of 4 points.

Public Still Thinks The New Tax Law Is For The Rich

Donald Trump (and the Republicans) are still trying to pass off their new tax law as benefitting mainly the middle class -- and Trump still claims he will not benefit from the plan (and neither will his rich friends). But the American people are not stupid enough to buy those lies.

The public is convinced that the new tax law benefits the rich the most. Only 21% thinks they will pay less under the new law, and only 27% thinks most Americans will pay less. But 53% says the rich will pay less and 52% says Donald Trump will pay less.

This does not bode well for the Republicans -- especially after the middle class sees how little they get and how much the rich get. And you can be sure that Democrats will be reminding them of that all the way up to November.

This same poll also asked if respondents thought Donald Trump should release his tax returns (as all other modern presidents and presidential candidates have done). Trump has said the public is not interested in his returns. As usual, he is WRONG. About 55% still wants his returns released, while only 28% say it's not necessary. And that feeling crosses gender, age, and racial lines.

These charts show numbers from a new Economist / YouGov Poll -- done between December 31st and January 2nd of a random national sample of 1,500 adults, with a 3 point margin of error.

GOP Is Far From Selling The Public On It's Tax Plan

The Republicans in Congress have passed their new "tax reform", and Donald Trump has signed it into law. But neither has been able to convince the American public that the plan is good for everyone (or even for just the middle class).

Only 24% think the plan will give tax cuts to all Americans, while 50% say most Americans will pay the same or more in taxes under the Republican plan. But most (55%) think the wealthy will see large decreases in their taxes -- and counter to what he is claiming, most (53%) believe Donald Trump will also see a large decrease in his taxes thanks to the new GOP tax law.

The public remains convinced the plan is mainly for the rich (and of course, the corporations) -- the entities that fund Republican campaigns. And they are right. The plan is little more than a massive redistribution of income and wealth from most Americans to the rich.

The public also still wants to see Trump's tax returns (see bottom chart). Twice as many think he should release his tax returns as think he shouldn't.

The charts above reflect information in a new Economist / YouGov Poll -- done between December 17th and 19th of a random national sample of 1,500 adults (including 1,291 registered voters), with a 3.1 point margin of error.

The chart below is from a recent Public Policy Polling survey -- done on December 11th and 12th of a random national sample of 862 registered voters, with a 3.3 point margin of error.

Tax-Cut Santa Only Gives To The Rich

(Cartoon image is by Stuart Carlson at carlsontoons.com.)

Here is Nobel Prize economist Paul Krugman's opinion of the new tax "reform" law the Republicans have passed (from his New York Times column):

It’s that time of year again. Some of us will get nice gifts, while others will get lumps of coal.

But the rules have changed a bit this time, at least as far as the federal government is concerned. The St. Nick you knew is on vacation, possibly permanently. In his place we have Republican Tax-Cut Santa, who has different priorities.

You see, the new guy doesn’t care whether you’re naughty or nice. In fact, he’ll actually reward you if you’re naughty in the right ways. But mainly he cares whether you’re rich, especially if your wealth comes from property (preferably inherited property), not hard work. In that case, you get a really big gift. If you’re an ordinary working family, not so much — and eventually you get that lump.

So let’s talk about whose stockings will be stuffed by the tax bill Republicans just rammed through without a single hearing or a single Democratic vote.

The centerpiece of the legislation is a huge tax cut for corporations. Republicans claim that this tax cut will be passed on to workers in the form of higher wages, but most independent studies conclude that even in the long run only between one-fifth and one-quarter of the tax cut will trickle down to workers. And the fraction will be much lower in the short run — say, the next few years. So this is basically a tax cut for shareholders.

And who are these shareholders? About a third of the total benefits will go to foreigners. Among U.S. residents, while many people have some stock in their retirement accounts, those amounts are generally small. Even including indirect holdings through mutual funds, the top 1 percent of domestic households owns 40 percent of stocks, the bottom 80 percent just 7 percent. So when Tax-Cut Santa comes to town, it’s definitely good to be rich.

Meanwhile, complicated things will happen to individual taxes: Some deductions will increase, others will be cut. Next year, most people will probably see a small tax cut, although for the middle class it will be a smaller cut than the one they got from Barack Obama in 2009 — a tax cut almost nobody noticed.

Crucially, however, while the corporate tax cut is permanent, all these individual goodies are set to erode over time, then expire, so that when the law is fully implemented, most middle-class families will see their taxes rise.

Republicans claim that we shouldn’t take this prospect seriously, because future Congresses will extend the individual breaks — that is, they’re saying that their own law is so bad that it won’t be implemented as written. And remember, that’s supposed to be a defense of the bill.

Now comes the fun part — the part where it pays to be naughty.

You see, the second most important piece of this tax bill, after the corporate tax giveaway, is a drastic tax cut for business owners, who will end up paying much less in taxes than people with the same income who work as someone else’s employee.

It’s hard to come up with any good rationale for this move, which will discriminate among taxpayers in a way that bears no relationship to any coherent policy goal. It will, however, offer a big financial windfall to a number of elected officials, especially Donald Trump.

And it will also open the door to a lot of tax-system gaming.

The obvious trick is to keep doing exactly what you’re doing now, but redefine yourself as an independent contractor rather than an employee. The bill contains rules that would supposedly limit that kind of abuse, but tax experts have already found huge loopholes. And these experts were just a handful of people working pro bono for a couple of days. Over the months ahead, as thousands of top-dollar accountants and lawyers get to work, expect to see many more routes to tax avoidance emerge — but only for the rich and well connected.

Consider one example we already know about. Imagine a partnership involving several doctors. Under the new rules, such a service business won’t qualify for the tax break (although it would if they were architects. Why? Who knows?). But the doctors can get around the rule by buying the building they work in, then charging themselves an exorbitant rent. Voilà! They get to pay much lower taxes — because real estate investment trusts, strange to say, do get the big tax break.

Or suppose some of my colleagues form an economics consulting firm. Such a firm won’t qualify for tax breaks. But suppose they also start selling nerdy T-shirts (“Economists do it with models”). With a little hocus-pocus, as I understand it, they can basically define themselves as a T-shirt business, and pay much less in taxes.

The point is that there will be hundreds of tax-avoidance games like these, costing taxpayers billions if not hundreds of billions in lost revenue. But only those who are both affluent and sneaky will be able to play these games. As I said, Tax-Cut Santa actually rewards you if you’re naughty, as long as you’re naughty in the right way.

And what about those promises that rich people wouldn’t get a tax cut, that the tax system would get simpler, that you’d be able to file on a postcard, and all that? All I can say is, ho ho ho.

How The GOP Tax Reform Hurts You And Your Family

From Democrats.org.

Trump Signs Giant Giveaway To The Rich Bill

(Photo of Trump signing the GOP tax cut bill is from CNN.com.)

Well, the odious and unfair Republican tax reform bill (i.e., bill to give massive tac its to the rich and corporations) is now the law. Donald Trump signed it on Friday. He called it the biggest tax cut ever (it is not), and continued to say it benefitted the middle class mainly (it does not). The chart above shows the average tax cut for each income group. Note that the top 5% make out like bandits -- and that is especially true of the top 1% and the top 0.1%.

Trump also said that workers would be thrilled to see all the extra money in their weekly paychecks (and would then love the GOP tax plan). I don't think that's true. Here's what each income group would see extra in a weekly check:

Bottom quintile..........$1.15
Second quintile..........$7.31
Third quintile..........$17.88
Fourth quintile..........$34.80

That doesn't sound like something that would excite American workers -- especially the bottom 60% of workers. Compare that to the huge benefits enjoyed by the rich. Workers are not going to like being given a pittance, while the rich enjoy big money saving.

And they certainly won't like it when they realize that pittance will disappear by 2027, and they will owe more in taxes than right now. By 2020, the bottom 60% will owe more in taxes, while the 60-80% quintile will only see $30 a year in savings. But the rich will still enjoy huge benefits. The top 1% will enjoy 83% of all tax cut benefits by 2027 (see bottom chart).

The Republicans (and Trump) think people will fall in love with their tax cut bill once it starts showing up on their paychecks. I disagree. I think it will just make people madder about the unfairness of it. And I think they'll show their displeasure at the polls in November of 2018.

NOTE: The figures in these charts are from the Tax Policy Center.

The New Tax Law Is Worse Than Unfair - It's Also Unworkable

(Cartoon image is by the inimitable Lalo Alcaraz.)

Much has been written about how unfair the Trump/GOP tax reform plan is -- and it is unfair, redistributing much of the countries wealth and income to the rich. But it gets even worse. It is probably an unworkable plan that will damage the IRS and blow a hole in the federal deficit and debt. Here's some of what John Cassidy says about it in The New Yorker:

This legislation simply isn’t workable in the long run. Unless it is fixed, it could end up crippling the tax system. . . .

What isn’t yet fully appreciated is how porous and potentially unstable the . . . tax code will be after the bill is passed. With a corporate rate of just twenty per cent, and a big new break for proprietors of unincorporated businesses and certain types of partnerships, the new code will contain enormous incentives for tax-driven restructurings, creative accounting, and outright fraud. Every tax adviser and scammer in the country will be looking for ways to reclassify regular salary income as favored types of business income.

For tax accountants, the first step will be to see how many of their well-to-do clients could feasibly convert themselves into corporations. “Taxpayers will be able to shield their labor income from tax by simply setting up a corporation and having their income accrue in the form of corporate profits. . . . Income that would have been taxed at the high individual rates is instead taxed at the low corporate rate,” an updated report from a group of tax experts at New York University, the University of Chicago, and other places noted on Monday. Investment income is also taxed at the lower rate. “There is really no downside to this game,” the report said.

For some high earners, another alternative will be to go freelance and set up their own businesses, reporting their profits as “pass through” income on their personal tax returns. If they do this, many of them will be able write off twenty per cent of their taxable income, thus reducing the new top rate from thirty-seven per cent to 29.6 per cent, and the new second-top rate from thirty-five per cent to twenty-eight per cent. This “game is clear,” the report said. “Don’t be John Doe, employee. Be John Doe, independent contractor (or partner in an LLC, receiving a profit share rather than wages).”

But not all unincorporated businesses will be treated equally under the new code. Law partners will be excluded from the twenty-per-cent write-off, as will doctors who co-own medical practices. The owners of other firms that provide a “specified service” whose principal asset is their “reputation or skill” won’t be eligible, either. At least, they won’t be until they start engaging in some restructuring shenanigans.

Take a mid-sized medical practice that owns its premises. Victor Fleischer, a tax professor at the University of San Diego, has suggested that it would make sense for such a practice to set up real-estate-investment trust, which would then charge the doctors and nurses a very high rent. The medical practice’s profits would suffer, but the real-estate company would make out well, and, because of Hatch’s last-minute changes, it would also be able to claim the twenty-per-cent pass-through deduction. In a similar vein, it might well make sense for law firms to set up different companies to handle their accounting, computer systems, and other routine services. Here again, the trick would be to overcharge the main business and generate profits in entities that are eligible for the pass-through deduction.

In many instances, this sort of reorganization would be perfectly legal. In other cases, in which the rules are ambiguous, the I.R.S. would doubtless try to crack down. But the I.R.S. is reeling after years of budget restrictions—it has lost about a fifth of its workforce since 2010—and the scale of the problems introduced by this new tax bill could very quickly overwhelm the tax agency. The shortfall in tax revenues could be enormous.

Perhaps that is what Republicans want to happen. Undoubtedly, there are some in the Party who would like to see the tax base decimated, the I.R.S. crippled, and the federal government forced to slash spending on domestic programs, particularly entitlement programs. But, for anybody who believes in a properly functioning government, a rational, clearly defined tax system is essential. The Republican reform doesn’t meet that standard. In the words of the report, the “haphazard lines” that the legislation creates are “fundamentally unfair and inefficient,” and, taken as a whole, it represents “a substantial blow to the basic integrity of the income tax.” It won’t survive in its current form.

GOP Celebrates Giving Massive Tax Cuts To The Rich

The photo above (from C-SPAN) is of some of the Republicans gathered at the White House to celebrate the passing (and signing) of their tax reform bill. Donald Trump called it a massive tax cut -- the largest ever to happen. He is right.

But if you are in the working or middle class, don;'t start making plans for a large (or even modest) purchase with your tax cut. The cut you will receive (if any cut at all) will be a very modest one -- and it will expire in 2025 (leaving you to actually experience a tax increase. The "massive" tax cuts were reserved for the rich and the corporations -- and unlike the cuts for the working and middle classes, those cuts are permanent.

The Republicans are crowing about what they have done for the middle class, but that is a lie. What they have actually done is redistribute income from the working and middle classes to the rich. This massive redistribution will make the rich even richer, and it will vastly increase the gap in wealth and income between the rich and the rest of America.

But it's worse than that. The bill also removed the individual insurance mandate. That will result in about 4 million losing their insurance in 2019, and by 2027 that will climb to 13 million. And it will result in a 10% increase in insurance premiums -- not just once, but every year between now and 2027. Those premium increases will easily outpace the small tax cuts some will receive.

And that's not the end of the problems this ridiculous bill will create. The bill blows a $1.5 trillion hole in the budget and will increase both the deficit and the national debt.

We can expect the Republicans to now begin whining about the deficit and debt (ignoring the fact they created most of it). And they will want to pay for their flagrant giveaway to the rich and corporations by cutting all government programs that help ordinary Americans (including Social Security, Medicare, Medicaid, etc.).

In effect, they are throwing 90% of America under the bus to pay for their massive redistribution of wealth to the richest 1%. This is not something to celebrate. It is a dark day for most Americans.