Opinion: Republican Tax Reform Is Fiscally Irresponsible

Speaker of the House and former chairman of the House Ways and Means Committee Paul Ryan in 2014. (Unmodified Creative Commons photo by Gage Skidmore. bit.ly/1p2b8Ke)

If you had listened to Republican lawmakers at all between the years 2009 and 2016, you probably would have thought fiscal responsibility was a central tenet of their belief system. You probably would have thought their disdain for budget deficits was earnest, and not at all politically contrived. You probably would have thought that, if Republicans were in charge, we would be tightening our belts – for better or for worse.

It turns out, you’d have been wrong.

After nine months of trying and failing to repeal ObamaCare, Republican lawmakers are ready to move on to what really motivates their public service: giving massive handouts to the wealthiest people in the country at the expense of the poorest.

From what scant details they have laid out, their plan does just that in the most fiscally irresponsible way imaginable.

Let’s talk about what Republican tax reform does.

According to the nonpartisan Tax Policy Center, the Republican tax reform plan “would collapse the seven individual income tax rates to three (12, 25, and 35 percent), increase the standard deduction, eliminate personal exemptions, increase the child tax credit, eliminate most itemized deductions, repeal the individual and corporate alternative minimum taxes, repeal the estate tax, reduce the corporate  tax rate from 35 to 20 percent, tax pass-through business income at a top rate of 25 percent, allow businesses to fully expense investment in equipment and machinery for at least five years, and adopt a territorial tax system that would exempt the foreign earnings of US corporations from US tax.”

So, what does all that economist jargon mean? And how does it affect you?

Well, the Republican tax plan (unsurprisingly) shakes out to be a huge tax cut for the very rich.

The estate tax, which taxes inheritances, only affects estates valued above $5.5 million. The alternative minimum tax exists to make sure rich people and corporations who game the system still pay their fair share. Exempting the foreign earnings of American companies is just a handout to corporations who stash their profits overseas. The parts of this plan that may be described as progressive do not make the plan good, they just make it “not-as-awful”.

All told, the plan reduces revenue by $2.4 trillion over ten years with much of that attributed to deficit spending. The government will have to borrow money to pay for these tax cuts.

For a party so vociferously opposed to Barack Obama running up the government charge card, they sure do seem willing to do it when it serves their own purposes.

I might be more sympathetic to the effort if these tax cuts were going to the middle class. I might be more willing to run up a tab if it meant stimulating local economies and extending a hand to struggling families. But that is simply not what this proposal does.

Over half of the tax benefits from this plan goes to the top one percent of earners. Those with incomes over $730,000 will see their after-tax income increase by 8.5 percent, while those of us in the bottom 95 percent may see as little as a half of a percentage point increase.

Republicans are going to explode the deficit by trillions of dollars all to finance tax cuts that won’t substantially help the economy while justifying it based on junk economic analysis just to fulfill hollow campaign promises.

The party of fiscal responsibility? They were lying all along.

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