The 7 Myths of the GOP Tax Bill – The Atlantic

 . The rich are not going to benefit from the bill.  

Trump has repeatedly promised that rich families like his do not stand to benefit from the Republican legislation. “We’re also going to eliminate tax breaks and complex loopholes taken advantage of by the wealthy. Who are they? I don’t know,” he said this week. “I think my accountants are going crazy right now. It’s all right. Hey, look, I’m president. I don’t care. I don’t care anymore. I don’t care. Some of my wealthy friends care. Me? I don’t care. This is a higher calling. Do we agree?”

This is false: As a general point, the richer the family, the more they benefit from the legislation, particularly over time. The Tax Policy Center has found that the biggest benefits would go to families in the top 5 percent as of 2019, with the smallest benefits going to those in the lowest income quartile. By 2027, families in the lowest two income quartiles would be receiving, on average, no benefit at all, with the biggest gains accruing to families in the top 0.1 percent of the income distribution. Moreover, the richest-of-the-rich families would exclusively benefit from initiatives like the reduction in or an elimination of the estate tax, which would let individuals like Trump pass millions and millions of dollars more to their heirs. 

 This is false: As a general point, the richer the family, the more they benefit from the legislation, particularly over time. The Tax Policy Center has found that the biggest benefits would go to families in the top 5 percent as of 2019, with the smallest benefits going to those in the lowest income quartile. By 2027, families in the lowest two income quartiles would be receiving, on average, no benefit at all, with the biggest gains accruing to families in the top 0.1 percent of the income distribution. Moreover, the richest-of-the-rich families would exclusively benefit from initiatives like the reduction in or an elimination of the estate tax, which would let individuals like Trump pass millions and millions of dollars more to their heirs.

https://d-32804246032454599256.ampproject.net/1510956201635/frame.html

5, cont. Trump himself would not benefit.

“This is going to cost me a fortune, this thing—believe me,” Trump said this week. “Believe me, this is not good for me. Me, it’s not—so‚ I have some very wealthy friends, not so happy with me, but that’s okay.”

This is not true. In fact, Trump stands to benefit to the tune of hundreds of millions, if not billions, of dollars, according to tax analysts, though it is hard to know with much specificity, given that he refuses to release his tax returns and House and Senate Republicans keep tinkering with the legislation. The elimination of the alternative minimum tax. The changes to the estate tax. Abbreviated depreciation schedules. Deductions or special rates for pass-through businesses. All these provisions stand to benefit Trump directly. Indeed, tax experts have said that as a real-estate developer he seems uniquely positioned to benefit from tax reform.

6. The plan is designed for the middle class.

“The beating heart of our plan is a tax cut for working families,” Trump said this week. “That’s what it is. We’re going to make sure that you keep more of your hard-earned money. We’re going to make sure, also, that you have a job that you want.”

This is not true. Indeed, families in the middle of the income distribution would on average see no benefit from the plan as of 2027, whereas families at the top would be paying far less in taxes and many families at the bottom would actually be paying more. One reason is that the legislation changes the way that the tax brackets get adjusted year after year to account for the effect of inflation. More families would get pushed into higher tax brackets sooner under the Republican plan, so they would end up paying more in taxes, even though the marginal rates would be lower. In addition, Republicans have gone after a number of provisions in the current code—the state and local tax deduction and the medical expense deduction, for instance—that help many middle-class and upper-middle-class families.

Republicans have countered some of these claims by saying that it is impossible to cut income tax rates without primarily benefiting the rich: The rich make more money, so inevitably they get big reductions when you cut taxes, the theory goes. But this argument is silly. It is mathematically simple to design tax cuts whose benefits go exclusively to lower-income and middle-income families. It just requires making the code more progressive—something that Republicans do not want and have chosen not to do.

7. It will help small businesses.

“We’ll also cut taxes for the millions of small businesses that file as individuals, and that’s going to come out of the hopper,” Trump said this week. “It’s getting there and it’s going to be better and better. We’re reducing the tax burden on businesses of all sizes and of every, single kind.”

Here, the Republican rhetoric is more a distortion than an outright falsehood. The plan, as it stands in the Senate, allows “pass-through” businesses—accounting for hundreds of thousands of businesses that pay under the individual rather than the corporate code—to deduct 22 percent of their income before paying taxes, up to a certain limit. In the House, it allows those pass-throughs to pay taxes at a special low rate. The pool of pass-through businesses includes any number of cookie shops and bodegas and corner stores, but also law firms, hedge funds, consulting firms, real-estate development companies, investment partnerships, and lobbying businesses. An estimated 70 percent of the benefits for such pass-through firms go to the top 1 percent of income earners—meaning this benefit is more about helping rich families than it is about helping small local businesses.

Moreover, such changes to the way pass-through businesses are taxed complicate the code and create a preferential category for rich individuals to try to work their income into—something contrary to the very spirit of tax reform. The new provisions have “the potential to become the single greatest inducement to tax arbitrage ever enacted by a single Congress,” the tax expert Daniel Shaviro of New York University Law School has writtenalso saying that they “might end up being the single worst structural change in the history of the U.S. federal income tax.”

Of course, the Trump administration has promised that what it says is true, and that it would produce evidence of how much good its tax plan would do for the American people. Then again, The New York Timesreports that a Treasury document purportedly showing that the Trump tax cuts would pay for themselves has not been forthcoming because it does not—and presumably cannot—exist.

ABOUT THE AUTHOR

  • ANNIE LOWREY is a contributing editor at The Atlantic, covering economic policy.

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Copyright © 2017 by The Atlantic Monthly Group. All Rights Reserved.

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5, cont. Trump himself would not benefit.

“This is going to cost me a fortune, this thing—believe me,” Trump said this week. “Believe me, this is not good for me. Me, it’s not—so‚ I have some very wealthy friends, not so happy with me, but that’s okay.”

This is not true. In fact, Trump stands to benefit to the tune of hundreds of millions, if not billions, of dollars, according to tax analysts, though it is hard to know with much specificity, given that he refuses to release his tax returns and House and Senate Republicans keep tinkering with the legislation. The elimination of the alternative minimum tax. The changes to the estate tax. Abbreviated depreciation schedules. Deductions or special rates for pass-through businesses. All these provisions stand to benefit Trump directly. Indeed, tax experts have said that as a real-estate developer he seems uniquely positioned to benefit from tax reform.

6. The plan is designed for the middle class.

“The beating heart of our plan is a tax cut for working families,” Trump said this week. “That’s what it is. We’re going to make sure that you keep more of your hard-earned money. We’re going to make sure, also, that you have a job that you want.”

This is not true. Indeed, families in the middle of the income distribution would on average see no benefit from the plan as of 2027, whereas families at the top would be paying far less in taxes and many families at the bottom would actually be paying more. One reason is that the legislation changes the way that the tax brackets get adjusted year after year to account for the effect of inflation. More families would get pushed into higher tax brackets sooner under the Republican plan, so they would end up paying more in taxes, even though the marginal rates would be lower. In addition, Republicans have gone after a number of provisions in the current code—the state and local tax deduction and the medical expense deduction, for instance—that help many middle-class and upper-middle-class families.

Republicans have countered some of these claims by saying that it is impossible to cut income tax rates without primarily benefiting the rich: The rich make more money, so inevitably they get big reductions when you cut taxes, the theory goes. But this argument is silly. It is mathematically simple to design tax cuts whose benefits go exclusively to lower-income and middle-income families. It just requires making the code more progressive—something that Republicans do not want and have chosen not to do.

7. It will help small businesses.

“We’ll also cut taxes for the millions of small businesses that file as individuals, and that’s going to come out of the hopper,” Trump said this week. “It’s getting there and it’s going to be better and better. We’re reducing the tax burden on businesses of all sizes and of every, single kind.”

Here, the Republican rhetoric is more a distortion than an outright falsehood. The plan, as it stands in the Senate, allows “pass-through” businesses—accounting for hundreds of thousands of businesses that pay under the individual rather than the corporate code—to deduct 22 percent of their income before paying taxes, up to a certain limit. In the House, it allows those pass-throughs to pay taxes at a special low rate. The pool of pass-through businesses includes any number of cookie shops and bodegas and corner stores, but also law firms, hedge funds, consulting firms, real-estate development companies, investment partnerships, and lobbying businesses. An estimated 70 percent of the benefits for such pass-through firms go to the top 1 percent of income earners—meaning this benefit is more about helping rich families than it is about helping small local businesses.

Moreover, such changes to the way pass-through businesses are taxed complicate the code and create a preferential category for rich individuals to try to work their income into—something contrary to the very spirit of tax reform. The new provisions have “the potential to become the single greatest inducement to tax arbitrage ever enacted by a single Congress,” the tax expert Daniel Shaviro of New York University Law School has writtenalso saying that they “might end up being the single worst structural change in the history of the U.S. federal income tax.”

Of course, the Trump administration has promised that what it says is true, and that it would produce evidence of how much good its tax plan would do for the American people. Then again, The New York Timesreports that a Treasury document purportedly showing that the Trump tax cuts would pay for themselves has not been forthcoming because it does not—and presumably cannot—exist.

ABOUT THE AUTHOR

  • ANNIE LOWREY is a contributing editor at The Atlantic, covering economic policy.

Loading …

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  2. The 7 Myths of the GOP Tax Bill


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  6. All the Promises Republicans Cannot Keep


  7. The Nationalist’s Delusion


  8. No Family Is Safe From This Epidemic


  9. The Casualties of Women’s War on Body Hair


  10. The Worst Secretary of State in Living Memory

Copyright © 2017 by The Atlantic Monthly Group. All Rights Reserved.

https://d-27348970761784848625.ampproject.net/1510956201635/frame.html

https://www.google.com/amp/s/www.theatlantic.com/amp/article/547322/

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