House Speaker Paul Ryan's description of President Trump's handling of the GOP tax bill as "exquisite" strips that word of any realistic meaning. Trump has repeatedly called the tax plan "the biggest in history;" however, as measured by percentage of GDP it is eighth. He had until recently called the plan "a middle-class tax cut," while most of the benefits go to wealthy individuals and profitable corporations. He has claimed that workers will have an annual income increase of anywhere from $4,000 to $9,000. This latter claim came from the White House Council of Economic Advisers, citing an economist who recently said he had calculated an increase of a more pedestrian $800. Perhaps Trump's most ludicrous claim is that he says that the tax plan -- labeled the Tax and Jobs Act of 2017 -- "will cost me a fortune." Some media sources have demurred from the task of estimating how much benefit will accrue to Trump, because he has not released his tax returns; others, however, including Democratic lawmakers, have gone back to this released 2005 federal income tax form and calculated an annual windfall of $11 million. This windfall is predicated primarily on the reduction of the top marginal tax rate from 39.6 percent to 37 percent and the increase in the income exempted from the alternative minimum tax (ATM). Trump will also benefit from the more generous treatment of business income. Trump's heirs will be enriched by the doubling of the monetary worth of inherited assets that can be exempted from taxation.
In addition to the exaggerated claims and outright lies that President Trump has issued about the tax plan before its enactment, he has made two very damaging statements and one of lesser significance since the enactment of the Tax and Jobs Act of 2017. He has called the reduction of the corporate tax rate from 35 to 21 percent the "most important factor" in the new law, thereby seriously damaging the prevailing GOP claim that it is a middle-class tax cut. He has also said that Obamacare has been repealed in the new law. What the new tax plan has eliminated is the individual mandate: All other provisions of Obamacare -- the Affordable Care Act (ACA) -- have been retained. By saying the ACA is dead, Trump has shifted to the Republican Party the responsibility for the millions who will become uninsured; and the premium increases that will result from the millions of healthy people, mostly young, who will decide to not purchase health insurance until they are hit by a bus, are seriously injured in a vehicle accident, or are diagnosed as having an expensive-to-treat medical condition.
The less significant but still damaging statement Trump has made is to downgrade the need to advertise the benefits of the new taxation structure. He thinks the tax cuts will sell themselves as people see less money being withheld from their checks for their work. To the extent that the GOP and their financial backers restrict their advertising to appease their leader, the less effective they might be to reverse current strong public opposition, assuming that to even be possible.
Democratic pollster Nick Gousevitch says the GOP can't win with a "tax cuts for everybody" argument, when they get a small cut and people who are already rich get huge cuts. Polling consistently shows that strong majorities favor taxing wealthy people and profitable corporations more if more revenue is needed to operate government.
Historically, political parties and their leaders have not benefited from prior major tax cuts. The Republican Party lost seats in Congress after major tax cuts in the 1980s. Barack Obama did not politically benefit from the fact that workers saw nearly a $700 increase in annual pay for a reduction in the FICA tax that finances Social Security. For the Bush II tax cuts in the early 1980s, the percentage who thought the rich benefited the most went from 55 percent in April 2001 to 60 percent in October 2004.
The Democratic Party will be spending heavily in 2018 to show how the new tax law is heavily skewed toward the wealthy; also, we should expect to see photos of GOP lawmakers up for reelection enthusiastically cheering for their party leader. A progressive group plans to double its media spending to $10 million for 2018 to defeat GOP supporters of the tax legislation.
I also will predict that the hastily approved roughly 1,000-page bill will be found to have many errors that will raise problems with its enactment. Claims of tax simplification, reform and being able to file one's return on a postcard have been superseded by a new tax structure with many new complexities added.
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