When President Trump and Republicans in Congress released their “Unified Framework” for tax reform, it was clear from the very sketchy outline that there would be losers. This is nothing new these days: the efforts to repeal-and-not-really-replace Obama-care, a holy grail for many Republicans, would have hurt tens of millions of Americans. The brewing Republican tax plan would also harm many millions of ordinary, working Americans.
In a piece I wrote on the day the sketch was made public, I identified four categories of potentially large losers: (a) single parent households; (b) large families; (c) upper-income earners in high tax states; and (d) the future.
Flash forward a few weeks, and what has happened? One of these four categories has made headlines and apparent progress in bettering its announced fate. Which one?
Those who answered C, upper-income earners in high states, take home the prize.
The not surprising answer is that, once again, it’s about following the money. But it’s not about the people’s money: it’s not about sound fiscal policies, or what’s good for the most Americans or the economy writ large. Instead, it’s about what’s good for politicians. And, in politics, following the money means finding where the lobbyists lie.
The simple fact of the matter is that three of the four targeted groups have little or no lobbying power.
Although more than one in three American children live in a single parent households, and although such households could be large losers under the Trump plan, they have few if any well-heeled friends to help them out. Ditto for large families. As for the future -- potentially badly hurt by the continued ratcheting up of government debt? Well, the future can wait until it can afford its own lobbying force; the yet-unborn neither vote nor pay to play.
All of this is not true for the high earners in high tax states such as California, New York and Illinois, who would be hurt by the proposed elimination of the deduction for state and local taxes. These people, as well as the States where they live, do have lobbyists in tow. Thus it is no surprise that there have been plenty of stories about how Congress is likely to back off total repeal of this particular tax break. Not so for heads of households or large families, whose taxes appear doomed to increase to help finance tax cuts for the rich.
This is a familiar theme in tax politics, especially when Republicans are in power. There are big, splashy tax cuts for the rich. These help grow the deficit, choking off the government’s ability to continue to provide resources for ordinary Americans. When things get too tight, sneaky little hidden taxes are raised to keep the lights on. And so the Trump plan, trumpeted by Gary Cohn, the President’s chief economic advisor, is slated to repeal the estate or so-called death tax. This is a tax paid only by the heirs of multi-millionaires -- rich people that Cohn has called “morons” for not simply planning to avoid the tax. How are we going to pay for all this? Well, it just might be through an increase in the gasoline tax -- which multiple millions of Americans pay daily -- according to Cohn himself.
None of this should come as a surprise to those who have observed tax policy for decades. The surprise, and the sadness, is that the politicians continue to get away with these tricks. At the People’s Tax Page, we are trying to educate the people about tax and fiscal policy, thinking that this is part of the last best hope for getting tax right, and finally beginning to address America’s worsening economic inequality. Come check out our videos and more, such as these we have prepared to explain how the not-rich in America pay lots of taxes.