“Absurd and unbelievable”: Inside the hypocrisy of the House GOP’s new tax plan
Under the proposal, the richest fifth of Americans would receive almost $61 billion in tax cuts next year, while the poorest fifth of Americans would receive an average of $40 per person.
FIRST THINGS FIRST
Weeks after threatening to default on the nation’s financial obligations in the name of reducing the federal deficit and national debt, House Republicans in the chamber’s chief tax-writing committee on Tuesday afternoon are set to mark up a tax bill that would add billions of dollars to the deficit and benefit wealthy people and big corporations.
Rep. Jason Smith (R-Mo.), chairman of the House Ways and Means Committee, characterized the American Workers and Jobs Act, a three-bill package of mostly business tax breaks as a response to everyday Americans’ concerns about inflation, high interest rates, worker shortages, and supply-chain bottlenecks.
But congressional Democrats, White House officials, and outside experts emphatically disagree.
“The idea that this legislation addresses any of that is absurd and unbelievable,” Steve Wamhoff, federal policy director at the Institute of Taxation and Economic Policy, said to Supercreator in an interview.
The most significant provisions, explained
Under the legislation, the richest fifth of Americans would receive almost $61 billion in tax cuts next year, including the wealthiest one percent who would get a $16,550 break, according to Wamhoff’s analysis for ITEP. The poorest fifth of Americans would receive $1.4 billion in cuts, an average of $40 next year.
Foreign investors, who own much of the stock in US corporations, would receive $23.8 billion in corporate tax cuts next year. The richest one percent is the only group of Americans, who would receive $28.4 billion.
The tax proposal would expand the Trump tax cuts for corporations and other businesses, which according to an estimate by the Committee for a Responsible Federal Budget, would cost more than $1 trillion dollars over the next decade.
Four of the five most significant tax-cutting provisions would expand corporate and business tax breaks from the 2017 Trump tax law, including a tax break to incentivize corporate research.
Wamhoff said at face value, it seems obvious to invest in American research and innovation. But when you zoom out, some of the companies that support this research tax break are companies that, for example, make electronic games for casinos, beer, and sausage.
“You have to ask yourself: What is the sausage-related innovation that we’re going to miss out on if we don’t provide these billions of dollars of subsidies through our tax codes to these companies?” he said.
Another tax break, known as bonus depreciation, allows companies to deduct the cost of equipment the year they purchase it instead of deducting the cost over several years until the equipment wears out. This provision has been exploited by companies, including Verizon, FedEx, Walt Disney, General Motors, Bank of America, and Amazon to avoid paying taxes in the past several years it’s been in effect.
The collapse of well-established companies like Toys “R” Us and Payless is due in part to a provision included in the proposal that subsidizes private equity firms that buy businesses and load them up with debt, which usually leads to bankruptcy. As Wamhoff explains in his analysis, looser rules on deductions for interest payments result in the tax code favoring corporations that borrow money over those that raise funds from investors by selling shares.
The Trump tax cuts allowed full expensing of up to $1 million in investments in equipment for companies that invest less than $2.5 million a year, but these limits would increase so that up to $2.5 million could be deducted by companies that invest up to $4 million in a single year under the Republicans’ plan.
And while the ITEP analysis finds the legislation includes an increase in the standard deduction that would help some middle-income taxpayers, it would do little for those in or at risk of poverty. (The bonus standard deduction would grow to $4,000 for married joint filers, $3,000 for heads of households, and $2,000 for other taxpayers.)
“So when you really look closely at a lot of these provisions and you ask yourself, these are business tax cuts, do they actually help the American economy? Do they make Americans better off?” Wamhoff said. “And I think the answer is no. And that's the sort of thing that you don't realize unless you really look closely at this legislation.”
A foundation for future cuts
Critics of the Republicans’ legislation like Rep. Richie Neal (D-Mass.) warn that these proposed tax cuts are a prelude to even deeper cuts for wealthy people and big corporations in 2025 and beyond.
“The only way they will ever achieve a balanced budget is by sticking seniors and working families with the bill,” he said in a statement. “When Democrats cut taxes, workers and families can afford life’s necessities, and the child poverty rate plummets. When Republicans cut taxes, they falsely claim they will pay for themselves, and workers’ wages will rise. It’s failed trickle-down economics.”
Wamhoff said the personal income tax cuts and the provisions that are on the tax return you do every year by Tax Day are set to expire at the end of 2025. And there’s a separate congressional Republican bill to make those provisions, first passed in the Trump tax law, Tax Cuts and Jobs Act, permanent.
There’s another set of business tax provisions that would satisfy companies through the same period, which would set up a major congressional battle for making all the cuts permanent.
“This is the sort of thing that lawmakers do: They say we’re gonna extend these things for two years, but they don’t really want to just extend them for two years,” Wamhoff said. “They’re going to extend them again and again, and maybe eventually make them permanent. Some lawmakers have decided that that’s the best strategy to sort of get the things that they want,” Wamhoff said.”
And the reason is simple: “By having this legislation that extends them for two years, that makes the cost look smaller even though they don’t really want it to be extended for two years — they want to do it forever. So really, the cost is going to be greater.
Dealmakers to the table
Even if the bill is voted out of committee and passes the House, it’ll run into a Democratic stonewall in the Senate and never be signed into law by President Biden.
So the question becomes: Would Democrats be willing to make a deal and what would it look like?
It’s no secret that the expanded Child Tax Credit and Earned Income Tax Credit are economic crown jewels for congressional Democrats and the Biden White House.
But due to how House Republicans have written the provisions for their tax cuts, Wamhoff said they’ll claim their proposal has a smaller price tag than what the tax relief Democrats want to provide.
“That’s why it makes the negotiation a little bit difficult because when one side of the negotiation is making their position look like they’re really not getting very much, but actually they’re getting a lot, that makes a negotiation more difficult,” he said.
What about the deficit?!
Let’s circle back to the deficit for a moment, which as I reported through weeks of debt limit coverage.
House Republicans fancy themselves as paragons of fiscal responsibility to the extent that snatching food from hungry people, health care from the uninsured, and cash aid from the poor is justifiable so long as those “savings” contribute to a balanced budget.
“What the Republican lawmakers have done recently is they’ve tried to win political points by talking about the deficit and the debt in the abstract and saying, ‘We really need to cut the deficit and debt’ without anyone really seeing what that would mean,” Wamhoff said. “Because when you really get down to most of the spending is on military, it’s on health care, it’s things that nobody wants to cut. Who’s gonna pay for this? Who’s gonna pay higher taxes? What is it all going to mean?”
If the Republicans have their way, it won’t be special interests and big corporations.
“They are claiming that our economic prosperity depends on reversing those provisions that they drafted and they voted on and that business lobbyists supported,” Wamhoff said. “So the question is: Were Republicans basically full of it at the time they enacted the Trump tax law and they drafted and supported all these provisions or are they full of it now?”
👋🏾 Hi, hey, hello! It’s Tuesday, June 13, 2023. You’re reading Supercreator Daily, your morning guide to the politicians, power brokers, and policies shaping the American creator experience.
TODAY IN POLITICS
All times Eastern
10 a.m. President Biden will receive his daily intelligence briefing.
The House is in with first votes expected at 1:30 p.m. and last votes expected at 5 p.m.
The Senate is in and will vote to confirm Elizabeth Allen to be Under Secretary of State for Public Diplomacy and advance the nomination of Hernan Vera California to be District Judge for the Central District of California at 11:30 a.m.
1 p.m. The president will meet with NATO Secretary General Jens Stoltenberg to discuss the upcoming NATO Summit.
2:15 p.m. The Senate will vote to advance the nomination of Jared Bernstein to be Chairman of the Council of Economic Advisers.
5 p.m. The Senate will vote to confirm the Vera and Bernstein nominations.
5:15 p.m. President Biden will speak at the Chiefs of Mission reception. First Lady Dr. Jill Biden will speak at a political event in San Francisco, California.
6:45 p.m. The first lady will speak at another political event in San Francisco.
7 p.m. The president will host a Juneteenth concert. Vice President Harris will speak and Second Gentleman Doug Emhoff will attend.
8 p.m. Dr. Biden will speak at the GIFFORDS Law Center’s 30th Anniversary Celebration in San Francisco.
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THEY DID THAT
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