Over at Bloomberg, Ramesh Ponnuru, sometime truth-teller on the Republican1 side of the aisle, comes up a little short with his take on the Republican tax “reform” package, headed “Tax Reform’s Losers Can Afford the Loss”. Ponnuru praises the bill because it “caps the tax deduction for mortgage interest at a loan value of $500,000, and eliminates the deduction for second homes” and “also would end the tax deduction for state and local income and sales taxes, and cap it for state and local property taxes.”
Megan McArdle, also writing in Bloomberg, more libertarian than Republican, had a different take on the moral significance of these proposed cuts: “It is hard not to notice that this bill is designed to spread benefits among Trump supporters, particularly the Republican donor class, while laying most of the costs on a single group of people: six-figure professionals living in blue states, a group known as the HENRYs (High Earning, Not Rich Yet). … But what is the principle by which almost all of the pain of this tax bill should be borne by affluent, but not rich, people who happen to live on the coasts? Other than ‘we don’t like them’.”
Both note the pain, and even Ramesh notes that the “rich” will enjoy significant benefits, but neither spells out the extent of the damage. According to the Committee for a Responsible Budget, tax cuts for business over 10 years will amount to about $2.2 trillion,2 and everyone who doesn’t work for Donald Trump agrees that most of cash released by the cuts will flow into the pockets of the top 10%, and the higher you are in that top 10%, the greater your share will be. The HENRYs, at the bottom of the top, will be blessed, but the TFR (Totally Fucking Rich) at the top of the top will ascend to the empyrean.
But wait, that’s not all. The phasing out of the estate tax, which only morons pay anyway, is expected to pass along $172 billion over the next 10 years, “targeted” exclusively to the top 0.03% of American households.3
But that’s still not all, either. Republican “reform” would also phase out the alternative minimum tax, pouring a cool $696 billion over 10 years into the now bursting pockets of the now ATFR (Absolutely Totally Fucking Rich), surely including one Donald Trump, who had to shell out an extra $31 million on his 2005 federal tax return, thanks to that totally unfair AMT. At least one injustice is being taken care of!
Afterwords
Ramesh (remember him?) concludes his column, with began with a big thumb’s up for the “sweat the HENRYs” provisions of the Republican bill, with a bit of a sigh: while the changes on the corporate side of things generally make sense to him, Ramesh feels that the provisions affecting individual taxpayers “seem like a lot of motion without much rationale”. Perhaps because their purpose, if not their “rationale”, is to distract the public from the fact that the real purpose of the package is help people like Donald Trump?
UPDATE
Bloomgberg’s Wall Street friendly Mihir Desai provides a more dispassionate take on the package, slightly (in my opinion) soft-pedaling the fact that the package would blow a $1.5 trillion hole the budget (over 10 years) to make life better for the rich while doing absolutely nothing for lower-income Americans.4 Because that’s how we Republicans roll!
- Sometimes, of course, partisanship is the better part of accuracy. Right before the 2012 election, Ponnuru asked who he thought was going to win. His head said “Obama” but his mouth said “Romney”. ↩︎
- The official corporate tax rate is currently 35%, but numerous “write offs” and other provisions pull the effective rate way down. Republicans want to pull the rate down to 20%–well, they want to because Donald Trump told them they had to. I’m sure it’s possible to create a more effective corporate tax code than the current one. Whether the Republican proposal does anything more than dump an ungodly amount of cash into the pockets of the ATFR is another matter. ↩︎
- This is an estimate. Less than 1% of estates must pay the federal estate tax, but how many Americans leave an “estate”? ↩︎
- In particular, Desai quite reasonably recommends the abolition of the “step up at death” provisions of the tax code that prevent proper taxation of assets transferred at death in virtually all estates without really bothering to notice that 1) the Trump administration has (of course) absolutely no interest in implementing this reform and 2) instead, the administration wants to guarantee that billions would pass to undeserving heirs with no taxation at all. ↩︎
