Explain This

The Tax Bill That Doesn’t Even Pretend to Help the Middle Class

Trump's tax plan was as expected. But the Senate's, which some assumed would be less egregious, is even worse: as rewarding to the rich as it is punitive to the poor and middle classes.

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It’s only been a few weeks since we endured the nightmare introduction of Trump’s tax plan, which was as bad as we expected. And earlier this month the House introduced their plan, and it too was awful. But we kept hearing the Senate tax plan would be different: more moderate, better reasoned. Indeed, George Washington said the Senate is supposed to be the body that cools the fury of House bills, just as a saucer cools hot tea. Except of course the Senate tax plan is equally bad. It has different terrible features, but at root it is explicitly designed to hurt the poor and reward the rich. Let’s take a look.

In some ways, you have to hand it to the Senate. They’re not even really pretending that this benefits the middle class. Mitch McConnell had to walk back his initial statement that nobody in the middle class would see a tax hike under the GOP bill, replacing that guarantee with a bunch of mush-mouth about how the Senate is “targeting levels of income” and “the average will be tax relief for the average taxpayer.” In other words, if you add up the incredibly large amount of tax cuts that go to the rich but average them across the population, you can say everyone, on average, gets a tax cut.

The New York Times ran some numbers and, even under the most charitable reading of this mess, around 25 percent of middle-class taxpayers would see their taxes go up an average of $1,000 in 2018. By 2026, that number rises to about 33 percent and an increase of $1,600 yearly. But hey! Four out of five high earners would get a tax cut right away in 2018. And if you’re in the top one percent? You’ll see a $37,000 tax cut in 2018. And if you’re poor? You might see a tax cut, but it will be something like $180 a year, which isn’t really going to lift anyone out of poverty.

In the hopes that maybe no one will notice or remember that this is a giant giveaway to corporations, the Senate bill diverges from the House version by waiting until 2019 to slash the corporate tax rate from 35 percent to 20 percent. If there’s anyone that really needed to have more money, it’s big companies, apparently. Over the next ten years, that tax cut costs nearly $1.3 trillion. Which is fine, it seems, because Republicans who almost universally ran on the notion that the ballooning deficit was the greatest threat to humankind are now totally cool with blowing up the deficit. One analysis shows the Senate plan increasing the deficit $1.7 trillion over the next ten years. Funnily, the fact that is such a big number might save us all from this tax plan: If the plan increases the deficit by more than $1.5 trillion, it can’t be passed via reconciliation rules (which only takes a simple majority of senators) and has to pass by 60 votes—which would take Democrats signing on to support this monstrosity.

Blowing up the deficit isn’t just an unfortunate side effect of this plan, however. It’s an intended result. Why? Because once you have a massive deficit, you have to start cutting government spending somewhere. And where better to cut it than from so-called “entitlement” programs like social security, SNAP, and Medicaid. Trump already signaled that intent in his 2018 budget proposal. He’d happily chop those and other programs that help low-income people, all in the name of giving corporations and the rich more money.

The plan also makes sure to kick blue-state residents in the teeth, just like the House plan. Both propose to end the state and local taxes deduction. Currently, you’re allowed to deduct your state and local taxes from your federal tax bill. This can be significant savings if you live in a state with relatively high local rates (think New York or California). Oh, but wait: The Senate plan goes a step farther and kills the property tax deduction too.

There’s a lot of news about how the Senate bill doesn’t entirely eliminate the estate tax, unlike the House bill. This is true, but ignores the fact that the Senate bill does double the exemption. In other words, if you’re the child of an incredibly rich person, you’ll inherit even more money, tax free, than you would currently, even though incredibly few people—about 5,000 this year—die rich enough for this tax to affect them. (If you’d like to hear something mind-boggling, listen to this interview with Senator Mark Walker of North Carolina, where he explains that he has two or three constituents that are subject to the estate tax and therefore it is very important to double the exemption.)

Where the Senate plan is marginally better than the House is that it keeps some of the deductions that the House seemed to eliminate out of pure mean-spiritedness. The medical expense deduction and the adoption tax credit remain under the Senate bill, as does the student loan interest deduction. That’s great, but doesn’t offset how bad this plan is overall.

There’s one person, of course, who would really really benefit from this plan: Donald Trump. It massively benefits real-estate developers, a thing Trump still functionally is, even though he is president, because he’s refused to truly divest himself of his business interests. It would also eliminate the Alternative Minimum Tax (AMT), a tax that is meant to ensure that people like Donald Trump actually pay taxes. In 2005, the only year for which we have any Trump tax returns, Trump was hit with the AMT and had to pay a 25 percent tax rate on his $153 million income that year. If there was no AMT, Trump would have paid 4 percent instead. Of course he wants that thing gone. And Trump is worth enough that he’ll be passing along many millions to his equally horrible children, and those proposed changes to the estate tax would certainly benefit them.

These tax plans aren’t just vicious—they’re sloppy. There’s no real thought or strategy, except to reward the rich. Much like the slapdash attempts to repeal Obamacare, the tax proposals exist because the GOP needs a win so that they don’t get destroyed in the midterm elections. Seat-of-the-pants governance combined with a deep loathing of the poor is no way to run things, but here we are.

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