The estimates are arriving and the facts of the TAX CUTS AND JOBS ACT are emerging. The Tax Policy Center (TPC), a purveyor of independent analyses of tax issues, has produced two noteworthy studies of the bill. To begin with, congressional deficit hawks must have worn out their vocal chords resisting the spending bills introduced during the previous administration:
“The Tax Policy Center has released an analysis of the macroeconomic effects of the Tax Cuts and Jobs Act as passed by the US House of Representatives on November 16, 2017. We find the legislation would boost US economic output by 0.6 percent of gross domestic product (GDP) in 2018, 0.3 percent of GDP in 2027, and 0.2 percent of GDP in 2037…Including macroeconomic effects and interest costs, the legislation is projected to increase debt as a share of GDP by just over 5 percent in 2027 and by just over 9 percent in 2037.”
– MACROECONOMIC ANALYSIS OF THE TAX CUTS AND JOBS ACT AS PASSED BY THE HOUSE OF REPRESENTATIVES, Benjamin R. Page, Joseph Rosenberg, James R. Nunns, Jeffrey Rohaly, Daniel Berger, November 20, 2017.
In other words, the positive impact of the planned tax cuts on economic growth will be limited. Meanwhile, the increase in federal debt as percent of GDP will be significant. In the period 2018-2027, the estimated net effect of the bill on the federal debt is an increase $1.5 Trillion. In addition, taxes will not fall for all taxpayers, and the benefits of the cuts will be lopsided:
“The Tax Policy Center has produced preliminary distributional estimates of the Tax Cuts and Jobs Act as introduced on November 3, 2017…The largest cuts, in dollars and as a percentage of after-tax income, would accrue to higher-income households. However, not all taxpayers would receive a tax cut under this proposal—at least 7 percent of taxpayers would pay higher taxes under the proposal in 2018 and at least 25 percent of taxpayers would pay more in 2027.”
–PRELIMINARY DISTRIBUTIONAL ANALYSIS OF THE TAX CUTS AND JOBS ACT, TPC Staff, November 8, 2017.
The uneven benefits of the tax cuts come at the expense of the working and middle classes. This “reform” effort is underway despite the fact that in 2014 (the most recent year for which data is available), the pre-tax share of national income of the bottom 50% was 12.6%, down 40% from its level in the late 1960s, according to the World Wealth and Income Database. The Joint Committee on Taxation (JCT), a nonpartisan congressional committee, has done its own distribution analysis. The JCT estimates of the working and middle-class tax increases are:
–DISTRIBUTION EFFECTS OF THE CHAIRMAN’S MODIFICATION TO THE CHAIRMAN’S MARK OF THE “TAX CUTS AND JOBS ACT,” SCHEDULED FOR MARKUP BY THE COMMITTEE ON FINANCE ON NOVEMBER 15, 2017, JOINT COMMITTEE ON TAXATION November 17, 2017, JCX-58R-17.
Granted, the bill’s effect includes tax decreases not shown, including corporate tax rate changes, that collectively form the theoretical basis for the projected increases in GDP. But this Act, and the way the President and its Congressional sponsors have sold it as a tax cut for the middle class, reminds me of this treasure from the National Archives:
From Thomas Jefferson to Edward Carrington, Paris, January 16, 1787
“… I am persuaded myself that the good sense of the people will always be found to be the best army…. If once they become inattentive to the public affairs, you and I, and Congress, and Assemblies, judges and governors shall all become wolves. It seems to be the law of our general nature, in spite of individual exceptions; and experience declares that man is the only animal which devours his own kind, for I can apply no milder term to … the general prey of the rich on the poor.”
Let us “prey” as we gather for Thanksgiving that the good sense of the people, our attention focused on the facts, will prevail; that this predatory bill will fail.