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GOP Tax Plan To Help Middle Class Families Become Lower Middle Class Families
Donald Trump invented money. It was his idea.
Paul Ryan and Republican congressional leaders had to go and reject Donald Trump's brilliant suggestion -- the "Cut, Cut, Cut Act of 2017" -- for their tax bill, which now has the boring (and lying) name the "Tax Cuts And Jobs Act," so now we're left with the thankless task of talking about what's in the bill and why it sucks. We already knew the broad outlines: Huge cuts for the top tax bracket, a cut in the corporate tax rate from 35% (which no corporation pays, ever) to 20% (which corporations may or may not actually pay), and elimination of the Alternative Minimum Tax and the Estate Tax, which are, respectively, currently only paid by the very upper middle class (and up) and the very rich. And now the realHouse bill (or its first draft) is out, so we have some idea of what the House wants to pass; Senate Republicans are expected to release their own bill next week, and then the two chambers will work out a compromise, or just fight each other forever over who can bone the poor and middle class hardest to transfer wealth to the top of the income scale, because look how "repealing and replacing" Obamacare turned out.
So what's in this mess, even though it's just a first draft (and may be revised under the reconciliation to a single line handing all tax revenue directly to the top tenth of the One Percent, to distribute as they please)? The big tax cuts are all there, as expected; the details on who'll get screwed, and how much, don't look especially great for middle-income earners, or even for upper-middle earners.
The "reform" part of the bill comes in the form of reducing the number of tax brackets from seven to four, which doesn't really make taxes simpler but sounds like a simplification. The devilish detail is that the lowest tax bracket is actually being nudged up a bit, from 10 percent to 12 percent, so hooray, higher taxes on the poors, but for low-income families, that would be partly offset by an increase in the child tax credit, from $1000 to $1600. The winners, of course, are the almost-top earners ($418,400 individual, $470,000 couples), whose taxes will drop from a 39.6% rate to 35%. In what looks to be an attempt to fend off claims that the richest folks will get a tax cut, the current 39.6% rate will remain in effect for those with individual incomes over $500,000 ($1 million for couples), but that's OK because when you're that rich, you can usually use all sorts of fun tricks to receive your "income" in ways that will qualify for lower rates anyway.
The greatest gifts in the bill go to corporations, which will see their tax rates reduced sharply, which this time for sure will create so much economic growth that everyone will prosper, at least as long as they're already prosperous. Tax cuts for businesses and the wealthy have never, ever really trickled down to the poor and middle class, and no one who isn't already a true believer in the church of Supply Side thinks otherwise. Oh, and the deficit will blow up, which probably won't really be as horrible as deficit hawks always fear, but which should increase the national debt so much that the next Democratic president and Congress will be told we can't spend any money that isn't for the military, because just look how big our national debt is!
But there will be lots of little ways taxes will increase on middle class folks to help make the rich richer. Say goodbye to deductions for student loan interest, medical expenses, and adoption costs, for instance, because students, sick people, and adoptive parents are all now "special interests." You want to get ragey, go read this WaPo piece on how the medical deduction will hurt the elderly and seriously ill, who apparently have had it too good for too long and need to pull their weight.
The plan will also limit -- instead of eliminating altogether, so that's a compromise -- the ability to deduct state and local taxes, which is still enough of an issue for Republicans from blue states that they may bolt the bill altogether in the Senate. The House plan will reduce the amount of the mortgage interest deduction, which may have the beneficial effect of making everyone in the residential real estate business -- and the home construction sector -- start hating Republicans. The National Association of Home Builders has already come out against the bill.
All in all, the bottom 35% of taxpayers will either gain nothing or end up paying more in taxes, depending on their family configuration and where they live. But don't worry, just as soon as the already wealthy get their tax cuts, you'll be able to get a third or fourth job that should help you make enough money to reduce your tax subsidy on Obamacare, assuming it's not repealed by the time you get your extra pittance.
Still, there are some people who'll come out doing really well, like Donald Trump and his family, so get ready for all the prosperity to start happening. You may just get sick of all the winning.