Experts warn against the repercussions of yet another “trickle-down” system
AFTER the failed attempts to reconstruct the American healthcare system, Congressional Republicans might be closer to their first major legislative victory in the Trump era with their overhaul of the tax system.
On the morning of Thursday, November 30, the Senate convened to continue discussions of the bill after it passed the preliminary vote through the Senate Budget Committee on Tuesday, as previously reported by the Asian Journal.
The original House bill — the Tax Cuts and Jobs Act — was met with much criticism upon introduction earlier this year. The bill detailed major tax cut for corporations, whose tax rate would drop from 35 percent to 20 percent.
The Senate version retains the seven-bracket system for individuals (currently: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent.), but lowers the rates for all but two thresholds (10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 38.5 percent).
By contrast, the House bill condenses the system into four brackets: 12 percent, 25 percent, 35 percent and 39.6 percent; this would raise the tax rate for the lowest income-earners.
In accordance to Senate rules, the Senate bill eliminates the individual tax provisions that help the middle class, including the child tax credit and lower tax rates at each income bracket, as a way to avoid driving up the deficit.
However, the Joint Committee on Taxation said on Thursday that the Senate bill will add $1 trillion to the deficit over the next ten years, even with economic growth.
Moreover, the committee said that any form of economic growth will offset only $407 billion of the $1.5 trillion cost, further muddying the Republican stance that the bill will not add to the federal budget.
Much like the Reagan-era “trickle-down” economics, Republicans promise that passing the biggest corporate tax in American history will catalyze an economic boom that will generate more jobs and more income for the middle class.
To the event in which the economy doesn’t grow fast enough for the GOP’s projections to flourish, several GOP senators pushed for a “trigger” which would automatically boost taxes, as previously reported in the Asian Journal.
Sen. Bob Corker (R-Tenn.) said on Thursday that a trigger would “avoid a situation where you’re not creating deficits should the projections that have been laid out not be real.”
Additionally, the trigger would hopefully stop the federal deficit from increasing, which many lawmakers are afraid the GOP bills would do.
Economists, however, argue that lowering the tax rate won’t necessarily ignite a jobs boom that will boost the incomes of middle-class Americans. Instead, a likely scenario could involve returning the extra revenue to corporate shareholders.
“Frankly, I think they are bonkers,” David Mendels, former CEO of software firm Brightcove, told Politico. “It doesn’t really work that way. No CEO sits there and says, ‘When my tax rate goes down, I’m going to hire more people and pay them more.’”
How likely is it to pass?
Democrats are currently fighting to halt the bill’s passage, but due to the Republican control of both chambers, their efforts carry little weight.
Since the debate on the legislation is only limited to 20 hours of deliberation, a Democratic filibuster is unlikely, a feat Republicans were seeking to bypass.
Contents of the bill are expected to change within that 20-hour window with Republicans looking to compromise differences held by party leaders.
Republicans remain confident that the bill will pass, but have yet to hear confirmation from a few key Republicans who have committed support.
Previously, the passage of the bill was a concern due to misgivings by key Republican lawmakers, including Sens. Susan Collins (R-Maine), John McCain (R-Ariz.) and Lisa Murkowski (R-Alaska); all three had rejected several versions of the rebuffed GOP health care bill.
However, on Tuesday, McCain, who previously wavered on his support, confirmed that he’d vote “yes” on the bill.
“I believe this legislation, though far from perfect, would enhance American competitiveness, boost the economy and provide long-overdue tax relief for middle-class families,” the 2008 Republican presidential candidate said in a statement.
Murkowski is also expected to vote “yes.”
Collins, who (like McCain) hasn’t shied away from voting against her party, said she remains concerned about the effect to repeal the Affordable Care Act (Obamacare) mandate. She also remains unsure about the provision that ensures that taxpayers can deduct some state and local taxes, a measure known as SALT.
The current version of the bill eliminates the Obamacare mandate and doesn’t clearly state whether the SALT amendment will remain.
“The SALT amendment is extremely important to me,” Collins said. “The health care agreement is extremely important for me. It would be very difficult for me to support the bill if I do not prevail on those two issues.”
The GOP tax bills have been deliberated with almost no bipartisanship collaboration, which has unanimously angered Democratic lawmakers, including Sen. Kamala Harris (D-Calif.) who oppose giving corporations and the most affluent tax breaks with the hope of positively affecting the middle class.
“So here’s my suggestion. Instead of giving corporations a big tax cut, let’s give the middle class a real tax cut. Instead of giving America’s most fortunate more tax breaks, let’s ask them to make a contribution a little bit more to help invest in infrastructure, job training and making college more affordable,” Harris offered at a Senate Budget Committee hearing on Tuesday. “Instead of playing politics with people’s lives, let’s listen to the American people who have spoken loud and clear.”
It’s not only Democratic lawmakers who oppose the bill. A majority of Americans also expressed unfavorable opinions of the bill, which is slowly becoming one of the least popular tax proposals since the Reagan era.
According to a Quinnipiac University survey, only 25 percent of voters approved of the plan. Other surveys conducted by ABC News/WaPo, CNN, Morning Consult and YouGov found approval at 36 percent or lower; voters found that the bill disproportionately favors the rich while providing little to no help for the middle class.
A majority of small businesses also oppose the bill, saying that the plan will benefit wealthy corporations the most.
A poll from the Public Policy Polling taken from Nov. 17-18 found that only 34 percent of small businesses support the GOP tax bills while 51 percent opposed it; nearly 800 small business owners across the nation were surveyed.
As of press time, the Senate vote has not been completed. (Klarize Medenilla/AJPress)