The Republican's All-Consuming Obsession With Tax Cuts For the Rich

[paralleluniverse]

Source: http://nymag.com/daily/intelligencer...be-denied.html

Paul Ryan’s Dream of Tax Cuts for the Rich Will Not Be Denied

The Republican Party has been organized around the goal of reducing taxes for the affluent for more than a quarter-century. The last time Republicans had full control of government, they poured their energy into passing huge, regressive tax cuts, first in 2001 and again in 2003. The return of Republican government makes it virtually certain that regressive tax cuts will pass again — the new majority can imagine no more compelling use of their power. But the task of enacting the tax cuts into law is proving to be more difficult than it was the last time around.

The basic House Republican plan is to cut taxes by about $3 trillion over a decade. Basically the entire proceeds of their plan would go to the rich — once it’s fully phased in, the highest-earning one percent would get 99.6 percent of the benefit, according to the Tax Policy Center’s analysis of the plan last fall. Republicans will surely tweak that plan, but it contains all the elements of the ideas they have been longing to enact: reducing the top tax rate, eliminating the tax on inheritances worth more than $10 million, reducing taxes on capital, and so on. The drive to cut these taxes reflects the party’s deep beliefs that overtaxation of the rich is the most serious form of oppression in modern political life, and they are prepared to spend enormous political capital to rectify this evil.

There is essentially no dissent within the Washington Republican Party — including both Congress or the White House — on this overarching goal. The difficulty lies in the practical implementation. Republicans are struggling because they want to avoid replicating what turned out to be the fatal weakness of the Bush tax cuts. Republicans know that they won’t get Democratic support for a big tax cut for the rich, and since Democrats have 48 Senate votes, well more than the 41 needed to sustain a filibuster, Republicans need to pass their tax cuts in a bill that can evade a filibuster. The only kind of bill that can do this is a budget-reconciliation bill. But budget-reconciliation bills have certain restrictions on their design, called “the Byrd Rule.” One of those restrictions is that they cannot increase the budget deficit outside of the ten-year period after which they are passed. A reconciliation bill can increase deficits in the short run, but if it has any costs after a decade, it can be filibustered, and is therefore useless for Republican purposes.

In 2001, Republicans dealt with this problem by simply ending their tax cuts after ten years. The Bush tax cuts had no budget costs after the ten-year window because the tax cuts disappeared. They hoped the tax cuts would attract enough political support that they would automatically be extended, but this never happened. The Bush tax cuts produced an anemic recovery, not the robust growth Republicans promised, and the Democratic Party coalesced around plans to eliminate the portion of the tax cuts that benefited only the highest earners (while keeping intact the tax cuts that also benefited the middle class). Since the tax cuts expired automatically, Democrats did not need to hold a vote to phase them out.

Republicans hope to avoid such a fate for the Trump tax cuts. Their hope is to design tax cuts that technically do not lose any revenue, which would allow them to be permanent, and force Democrats to gain control of the House, Senate, and presidency in order to overturn them.

How do you design a huge tax cut for rich people without losing a lot of revenue? Republicans are looking at three pots of money to offset the cost: Dynamic scoring, Obamacare taxes, and a border-adjustment tax.

Dynamic scoring means taking into account the effect on economic growth caused by cutting taxes. If tax cuts encourage permanently higher growth, it would increase revenue collections, offsetting some of the losses. Republicans believe, as a matter of theology, that the effect is huge. This belief caused them to predict the Clinton tax hikes on the rich would fail to increase revenue, that the Bush tax cuts would lose very little revenue, and that expiring the Bush tax cuts on the rich would cause growth to slow down. That none of these things happened has not diminished the fervor of the Republican faith in the transformative economic power of cutting taxes on the rich. Mainstream economic models find that tax-cut plans like those proposed by Republicans do little or nothing to stimulate growth — the stimulative effects of lower rates are small, and canceled out over the long run by the offsetting depressive impact of higher deficits.

Historically, “dynamic scoring” has always been a talking point: Republicans have insisted that official forecasts are wrong because they fail to use dynamic scoring. In 2015, the GOP Congress ordered the Joint Committee on Taxation, the federal agency that measures the impact of tax changes, to incorporate dynamic scoring. But it seems unlikely that JCT will assume the kinds of “yuge” dynamic effects that conservative ideologues prefer.

The next source of money is repealing Obamacare. The connection between the two issues might seem obscure, but it matters technically. The Republican plan to repeal Obamacare would eliminate all the taxes that were raised to help pay for the benefits — about $1.2 trillion over the next decade. This would lower the baseline of tax revenue, meaning that Republicans would need to design a tax code that raises $1.2 trillion less in revenue in order to be “revenue-neutral.” That makes it crucial for them to repeal Obamacare before they cut taxes.

Obamacare repeal was expected to be a rapid step, already wrapping up by now. Instead it is a quagmire with no end in sight. Of the many reasons the repeal crusade is failing, one of them is that the revenue trick is a little too clever. Some Republicans realize that if they repeal all of Obamacare’s taxes first, they’ll have no way to pay for a replacement plan later. So, as Obamacare bogs down, it has also bogged down what was supposed to be a rapid-fire progression to tax reform. (Budget expert Stan Collender has pointed out that the Republicans have designed an intricate legislative sequence to enact their plans that might collapse altogether.)

The third and final source of money was supposed to be a border-adjustment tax. This is a complicated idea that would essentially tax imported goods. The concept has a lot of support among tax experts, at least in theory. The idea has several attractions for the GOP. First, by increasing costs of imported goods and decreasing costs on exports, it would seem to fulfill Trump’s promise of an “America First” trade policy. Second, if designed properly, it would raise another trillion dollars a decade or so. And, because it would function as a kind of sales tax, it would be paid mostly by the middle class and the poor. Essentially, it would free up another trillion dollars for lower taxes to be paid by the rich.

This explains why Paul Ryan has evangelized so fervently on behalf of this idea of a border-adjustment tax. It holds the key to his dream of enacting a large, permanent tax cut for the rich.

There are, alas, enormous barriers to making Ryan’s dream a reality. Among American businesses, the border-adjustment tax creates winners and losers. Among the latter are big-box retailers like Walmart. The divide among business lobbyists has produced a divide among Republicans, many of whom loathe the border-adjustment tax. (Leading the opposition is Senator Tom Cotton, who represents Walmart’s home state of Arkansas.) Divisive policies often pass Congress. But in this case, Republicans need near-total unanimity, since they’re not going to attract any Democratic votes for a huge tax cut for the rich.

Even if they can somehow corral their dissenters, it’s far from clear the border-adjustment tax would work as promised. It’s very unclear that a concept as complex and novel can actually be written into law in the time frame Republicans want. Of course, from the GOP’s perspective, the issue isn’t whether the tax works but whether it is scored as having worked for the purposes of their budget. But two tax experts I spoke with expressed doubt that Congress can actually write a workable border-adjustment plan that raises the revenue they hope for, even if it wants to.

So where does that leave them? Probably in the same place they were in 2001. They could scale back on the tax cuts for the rich, but that would run counter to every impulse within the Republican Party. You will pry the tax cuts for the rich from Paul Ryan’s cold, dead hands. If Ryan’s plan fails, the next best thing to passing enormous, permanent tax cuts to the rich is to pass enormous, temporary tax cuts for the rich. If Obamacare repeal and the border-adjustment tax flounder, Congress will probably just go back to what worked (or, if you prefer, “worked”) 16 years ago. Republicans have control of Congress, and even if nothing else comes out of it and everything else falls part, the richest one percent are going to get paid.

There's nothing more sacred than trickle-down economics and tax cuts for the rich among Republicans. Of course, Trump also has this exact same obsession, promising $5T in tax cuts for the rich in his campaign, which is why there's nothing Trump can do, no matter how crazy to lose Republican support as long as he's going to sign that tax cut into law.

Enjoy being conned, you white working class dupes.

[derpkitteh]

it's stupid how people believe in this trickle down shit. only thing trickling down is the piss of the rich as they laugh at how stupid the poor are.

conservatism only belongs on the borders. everywhere else, it's only a detriment to society.

[Spectral]

Calling an ideological difference an "all-consuming obsession" is pretty lame. Doing so basically invites Republicans to reply that Democrats have an all-consuming obsession with raising taxes on the rich. One can explain a policy disagree without using a phrase that will rightly be met by ideological opponents with an eyeroll.

[Bodakane]

Trickle Down is a myth. Trickle Up on the other hand...




Soon we'll be living like in Downton Abbey again. One wealthy family living in a castle being able to afford 20-50 personal servants.

You'll find this coincides with capital gains tax rates and the Great Depression.

Anytime captial gains tax rates are below 20 bad things happen, whether its the Great Depression or the Great Recession.

[paralleluniverse]

Calling an ideological difference an "all-consuming obsession" is pretty lame. Doing so basically invites Republicans to reply that Democrats have an all-consuming obsession with raising taxes on the rich. One can explain a policy disagree without using a phrase that will rightly be met by ideological opponents with an eyeroll.

False equiveancy.

Democrats want to raise taxes on the rich, but it's not an all-consuming obsession, while the Republicans have a long-standing, always consistent, all-consuming obsession with tax cuts for the rich. It has always been the top, number one, most important policy priority.

[Deleted]

Calling an ideological difference an "all-consuming obsession" is pretty lame. Doing so basically invites Republicans to reply that Democrats have an all-consuming obsession with raising taxes on the rich. One can explain a policy disagree without using a phrase that will rightly be met by ideological opponents with an eyeroll.

Even when the "ideological difference" is not founded in our reality?

[Spectral]

False equiveancy.

Democrats want to raise taxes on the rich, but it's not an all-consuming obsession, while the Republicans have a long-standing, always consistent, all-consuming obsession with tax cuts for the rich. It has always been the top, number one, most important policy priority.

I don't think I've seen a major Democrat politician campaigning in recent years not focus on the issue and certainly the actual policy outcomes when Democrats get sufficient control to pass tax changes reflects that.

Why not just say, "this issue remains a top priority and has been for decades"? I can't see how using the phrase "all-consuming obsession" is remotely helpful. I don't think Paul Ryan wakes up in cold sweats about the matter - it's just a top policy goal.

[Stormspellz]

Calling an ideological difference an "all-consuming obsession" is pretty lame. Doing so basically invites Republicans to reply that Democrats have an all-consuming obsession with raising taxes on the rich. One can explain a policy disagree without using a phrase that will rightly be met by ideological opponents with an eyeroll.

Its "all-consuming" because no matter how many times the system fails, Bush, Kansas, Louisiana, ect they keep pushing it like a sleazy televangelist

[Spectral]

Even when the "ideological difference" is not founded in our reality?

Its "all-consuming" because no matter how many times the system fails, Bush, Kansas, Louisiana, ect they keep pushing it like a sleazy televangelist

Yes, even if you strongly disagree with ideological opponents, it can still be helpful to engage with them politely rather than insisting that they're "obsessed" with a given policy.

[Deleted]

I call this neo liberalism continued.

Reagan failed, so will Trump.

[Stormspellz]

Yes, even if you strongly disagree with ideological opponents, it can still be helpful to engage with them politely rather than insisting that they're "obsessed" with a given policy.

when you give someone mountains of data telling them it doesn't work and they still insist that it does, what would call that other then obsessed or "all-consuming"?

[Shadowferal]

Ryan's little Tax Plan probably won't sell, and it will be because of that 20 percent across-the-board tax on imports, also known as border adjustment.

[Skroe]

Trickledown economics is BS of course, but the problems with the tax structure is not.

I believe that a larger portion of the tax burden needs to be shifted out of Federal Taxes (including Social Security and Medicare taxes) and moved to the State level. To put it very simply: big tax cuts at the federal level (with one exception), big tax increases at the State and Local level. This would be accompanied by the social safety net being moved largely to State-run programs, rather than National-level Federal programs.

I want to make very clear though. This is an ambition. Liberals differ wildly in their vision for that. Getting from where we are to what I just wrote would be a long process and huge amount of compromise would be necessary.

At a fundamental level, it comes down to this: chart:



The Federal Spending chart needs to go back looking like 1970, and the top-line brought down. I would spend somewhat more on defense (5% of GDP by law in my opinion, 1.2% higher than today), and a hell of a lot more on discretionary programs as a percentage of the budget. Social Security and Medicare can still exist, but as largely state-programs, paid for with state taxes, rather than a Federal one. Differentiating benefits and taxation rates will lead to innovation and competition between the States. At a philosophical level, let Texas care for the health and welfare of Texas residents... and largely pay for it to. We do that for infrastructure. We largely do it for education. We should do it for much more. If their political leadership adopt lousy policies that harm Texas residents, they'll pay for it at the polls. By moving many of the big policy decisions to the Federal level, it encourages a lack of accountability and resolution on controversial spending questions. This creates this situation we hate: everyone hates Congress, but re-elects their Congressman. Because it's the other guy's Congressman and the interest they represent that is the problem.

The exception I mentioned above I would also see, broadly, a national sales tax introduced over time, to offset an even lower federal income tax rate. Are they regressive? Absolutely, but this is a predominantly middle and upper class country, and offsetting the tax burden on lower classes on taxing consumption, perhaps via some form of tax rebate, is a solvable problem.

[Spectral]

when you give someone mountains of data telling them it doesn't work and they still insist that it does, what would call that other then obsessed or "all-consuming"?

Do you figure that Republicans have any argument or data that they'd reply with?

[primalmatter]

Trickledown economics is BS of course, but the problems with the tax structure is not.

I believe that a larger portion of the tax burden needs to be shifted out of Federal Taxes (including Social Security and Medicare taxes) and moved to the State level. To put it very simply: big tax cuts at the federal level (with one exception), big tax increases at the State and Local level. This would be accompanied by the social safety net being moved largely to State-run programs, rather than National-level Federal programs.

I want to make very clear though. This is an ambition. Liberals differ wildly in their vision for that. Getting from where we are to what I just wrote would be a long process and huge amount of compromise would be necessary.

At a fundamental level, it comes down to this: chart:



The Federal Spending chart needs to go back looking like 1970, and the top-line brought down. I would spend somewhat more on defense (5% of GDP by law in my opinion, 1.2% higher than today), and a hell of a lot more on discretionary programs as a percentage of the budget. Social Security and Medicare can still exist, but as largely state-programs, paid for with state taxes, rather than a Federal one. Differentiating benefits and taxation rates will lead to innovation and competition between the States. At a philosophical level, let Texas care for the health and welfare of Texas residents... and largely pay for it to. We do that for infrastructure. We largely do it for education. We should do it for much more. If their political leadership adopt lousy policies that harm Texas residents, they'll pay for it at the polls. By moving many of the big policy decisions to the Federal level, it encourages a lack of accountability and resolution on controversial spending questions. This creates this situation we hate: everyone hates Congress, but re-elects their Congressman. Because it's the other guy's Congressman and the interest they represent that is the problem.

The exception I mentioned above I would also see, broadly, a national sales tax introduced over time, to offset an even lower federal income tax rate. Are they regressive? Absolutely, but this is a predominantly middle and upper class country, and offsetting the tax burden on lower classes on taxing consumption, perhaps via some form of tax rebate, is a solvable problem.

I would argue trickle down could work but it requires a closed system economy that is unable to import or export labor.

The idea is sound but it simply can't work when applied to a actual economy.

[Tico]

The Republican Party has many bad obsessions (tax cuts for the rich, subsidizing fossil fuels, etc...) because they are just subsidizing themselves. That party has way too much conflict of interests.

[Endus]

Social Security and Medicare can still exist, but as largely state-programs, paid for with state taxes, rather than a Federal one. Differentiating benefits and taxation rates will lead to innovation and competition between the States. At a philosophical level, let Texas care for the health and welfare of Texas residents... and largely pay for it to. We do that for infrastructure. We largely do it for education. We should do it for much more.

I'll just note that one of the only reasons it works for education is that there are federal requirements regarding education that still have to be met by those State actors. The same would have to apply to welfare/medicare/etc. Otherwise, given that people are free to move to a different State at any time, poorer States that scrimp or defund those programs would see a massive exodus of their poor, cratering their State markets (job, real estate, commercial, etc), resulting in even less State income to fund programs to bring people back.

There are arguments to be made for State administration, but not necessarily for pure State funding or a lack of Federal oversight. In Canada, for instance, our health care systems are provincial, not federal, but there are federal requirements they're all beholden to, and the funding is split between the two (with Federal funding distributed as a somewhat balancing force between provinces with varying tax incomes).

- - - Updated - - -

I would argue trickle down could work but it requires a closed system economy that is unable to import or export labor.

The idea is sound but it simply can't work when applied to a actual economy.

How is it "sound"? Trickle-down economics, so we're clear, is the idea that if the wealthy have more money, they'll re-invest that money in expanding their companies and creating more jobs.

They fail to explain WHY they would do this.

Charity? Are they creating make-work jobs out of the goodness of their hearts? That's laughable.
Expanding their services to cater to a larger market? The market hasn't changed. The trickle-down economics has to produce that change; this argument relies on it, meaning it's putting the cart before the horse; they have this entirely backwards and it can not work this way.
Competition? Why are they throwing money at competing with other companies that are similarly throwing more money at competing? This makes no sense to anyone, and requires that CEOs and shareholders be complete fucking morons.

That's the root of why trickle-down is ridiculous. Its own principles cannot bring about the results they claim. Which is why, in practice, every time it's been tried, it has spectacularly failed to bring about those results, and has generally seen greater economic collapse, not resurgence.

[Spectral]

I'll just note that one of the only reasons it works for education is that there are federal requirements regarding education that still have to be met by those State actors.

There's not much in the way of evidence for this claim. The Department of Education began operating in 1980 and it's very difficult to find any evidence that the quality of education has changed noticeably since that time. Most snapshots of scores over time look something like this:



PISA scores are similarly unencouraging:


I have not seen any good evidence that federal standards have noticeably improved the quality of American education, although I do find it plausible that they've contributed to the skyrocketing costs of education over those decades.

[Endus]

There's not much in the way of evidence for this claim. The Department of Education began operating in 1980 and it's very difficult to find any evidence that the quality of education has changed noticeably since that time. Most snapshots of scores over time look something like this:



I have not seen any good evidence that federal standards have noticeably improved the quality of American education, although I do find it plausible that they've contributed to the skyrocketing costs of education over those decades.

I wasn't making a point about costs. Though I'll note that your own graph extrapolates that the creation of the Department of Education didn't actually have any noticeable impact on the trend line there.

If you're going to ask me to defend some of the principles the American system is based upon, I won't, because I disagree with them. But I'll also note the American system is not the only one on the planet.

You need federal standards, because otherwise, you'll get States that decide that kids don't need science education, they just need more Bible study. And we know this, because they've tried to do just that.

[Skroe]

I'll just note that one of the only reasons it works for education is that there are federal requirements regarding education that still have to be met by those State actors. The same would have to apply to welfare/medicare/etc. Otherwise, given that people are free to move to a different State at any time, poorer States that scrimp or defund those programs would see a massive exodus of their poor, cratering their State markets (job, real estate, commercial, etc), resulting in even less State income to fund programs to bring people back.

I'd be absolutely in favor of this. It's by no means an unreasonable requirement.

There are arguments to be made for State administration, but not necessarily for pure State funding or a lack of Federal oversight. In Canada, for instance, our health care systems are provincial, not federal, but there are federal requirements they're all beholden to, and the funding is split between the two (with Federal funding distributed as a somewhat balancing force between provinces with varying tax incomes).

In my highly idealistic scenario described above, I see the 18% spent on Social Security / Medicare in the 1970s budget that I use as a basic model as functionally being the oversight + the grease on the wheels. The Federal Government certainly does have some role to play in the social safety net. But I think it better a coordinating and standardization one, than a monolithic policy+execution top-down one.

A total elimination of the Federal Social Safety net and making it purely a State run is not realistic, nor desirable. But moving the as much of the spending burden to the State Level, along with more of the Tax Burden, I think would be highly healthy to both the programs in question and Democracy in principle.

I see the problem of government gridlock, as I alluded to, as entirely connected to the purpose of Congress. The Gridlock comes not from corruption or special interests, or lack of term limits or nonsense like that. It's because there is a fundamental lack of national consensus on what the role of government is on some of the things we spend huge amounts of money on (which is, after all, Congress' chief power). I see the solution to a degree, to kick it down to the State level. After all, why do Massachusetts Senators and Wyoming senators have to come to a consensus on the Social Saftey net, when per capita Massachusetts, a tremendously rich state, contributes more to the Federal pool? To paraphrase General Mattis at NATO the other day, Massachusetts senators can't care more for the welfare of the Children of Wyoming, then Wyoming's senators. My solution: we should expect them TO care. And if Wyoming's elected officials fail their State's Children, then in State elections, Wyoming Residents will throw them the hell out. The problem is, right now, they just send their Senators back every year to do battle against our senators, over what is, frankly, our money.