the G.O.P. still ended up with a pair of bills that look, once again, like the caricature of Reagan-era Republicanism the party has become: heavy with tax cuts for corporations and the heirs of millionaires, lighter on relief for the middle class, lighter still for the working class, with a complicated slew of provisions and score-gaming expiration dates that have made it hard to discern whether lots of non-rich Americans (including the plan’s supposed model beneficiary, a family making $60,000 with multiple kids) even get a tax cut at all.
..The Republicans seem to be trying, in their none-too-competent and ideologically straitjacketed way, to cut taxes for two major constituencies, employers and middle-class families, while paying for some of these tax cuts by goring well-off professionals in high-tax liberal states.
.. The (much more modest) Republican proposal to tax the richest university endowments is admittedly more of a targeted culture-war jab.. the problem is what the Republicans are doing with the money. Specifically (and entirely predictably), they are plowing way too much of it into tax cuts for their donors, and not enough into tax cuts for everybody else... Senate Republicans seem to be turning to a more complicated and irresponsible alternative instead — one that gets more money for parents and middle-income taxpayers up front by making all their tax cuts sunset after 2025 (even as the corporate cuts are made permanent).. And it tells you something depressing, if unsurprising, about the G.O.P. that this combination is apparently vastly preferable to asking the donors and ideologues to just accept half a corporate-tax-cut loaf... At some point the party’s moderates and would-be reformers have to take a stand for the wild-and-crazy proposition that the Republican Party should pass legislation that has some chance of being popular and isn’t insanely jury-rigged.
How a New Inflation Measure Raises Taxes on the Middle Class
Switch to chained consumer-price index would shift burden after several years as people move into higher bracket
Tucked into Republicans’ tax overhaul bill is a technical tweak to how inflation is measured. The change is designed to hold down the deficit, but over time it becomes a significant tax increase that hits many of the same middle-class households who start out as the plan’s beneficiaries.
.. This makes economic sense because economists consider the chained CPI a more accurate gauge of the cost of living. But because it also yields a lower measure of inflation, it pushes people more rapidly into higher tax brackets. For some income groups, this could eventually wipe out the entire initial tax cut
.. many taxpayers with no real gain in income would still be pushed into higher brackets merely because of inflation.
.. But economists have long known the CPI overstates the cost of living. When prices for a particular commodity rise faster, consumers shift to cheaper alternatives. The CPI adjusts for this by updating the weights of various items in the index every two years.
.. Since 2001, inflation has averaged a quarter percentage point less under the chained CPI than the regular CPI.
.. This raises about $130 billion more revenue over 10 years in the latest versions of both the House and Senate bills
.. After-tax incomes drop by 0.2% to 0.3% for households earning between $40,000 and $1 million and 0.4% for those earning between $20,000 and $40,000. The impact is largest for the lowest-income taxpayers because they depend more on the standard deduction, child tax credit and a new family flexibility credit, all of which will be indexed to the chained CPI.
.. This is also why some income groups start with a tax cut and end up with a tax increase.
.. Once the new index becomes law, don’t count on it being reversed, for two reasons: First, because the effect is so subtle in any single year, most taxpayers won’t even notice so there is little political price to keeping it. Second, as deficits widen, the revenue the new index raises becomes ever more irreplaceable.
.. Lawmakers decided to let most of the personal tax cuts expire in 2025 to keep the total cost within Senate guidelines. But the chained CPI will stay.
.. when lawmakers finally get around to tackling the deficit, they may apply the chained CPI to government benefits such as Social Security to save even more money.
Republicans Can’t Pass Bills
There are many different flavors of freedom. For example, there is freedom as capacity and freedom as detachment.
Freedom as capacity means supporting people so they have the ability to take advantage of life’s opportunities. You encourage your friend to stick with piano practice so he will have the freedom to really play. You support your child during high school so she will have the liberty to pick her favorite college.
Freedom as detachment is giving people space to do their own thing. It’s based on the belief that people flourish best when they are unimpeded as much as possible. Freedom as detachment is marked by absence — the absence of coercion, interference and obstacles.
.. Back when the Republican Party functioned as a governing party it embraced both styles of freedom, but gave legislative priority to freedom of capacity.
.. Over the past few decades Republicans cast off the freedom-as-capacity tendency. They became, exclusively, the party of freedom as detachment.
.. Despite all the screaming and campaigns, all the government shutdown fiascos, the G.O.P. hasn’t been able to eliminate a single important program or reform a single important entitlement or agency.
.. The freedom-as-detachment philosophy is a negative philosophy. It is about cutting back, not building.
.. A party operating under this philosophy is not going to spawn creative thinkers who come up with positive new ideas for how to help people. It’s not going to nurture policy entrepreneurs. It’s not going to respect ideas, period.
.. If you’re a regular American, the main threats to your freedom are
- illness,
- family breakdown,
- social decay,
- technological disruption and
- globalization.
.. The Republicans could have come up with a health bill that helps people cope with illness and nurtures their capacities, a bill that offers catastrophic care to the millions of American left out of Obamacare, or health savings accounts to encourage preventive care.
.. And if you think G.O.P. dysfunction is bad now, wait until we get to
- the debt ceiling wrangle,
- the budget fight and
- the tax reform crackup.
.. we’re living at a time when the prospects for the middle class are in sharp decline. And Republicans offer nothing but negativity, detachment, absence and an ax.
The Senate’s Tax Panic
ObamaCare created a 3.8-percentage-point surtax on capital gains, dividends, interest and other forms of so-called “unearned income.” This tax increase on capital was sold as hitting the rich, but note that it brought the top rate to 23.8% for singles earning as little as $200,000 and couples $250,000. That’s a middle-class couple.
.. The conceit seems to be that Democrats and the media will give Republicans credit for surrendering, the controversy will melt away, and everyone will repair to the ideological conformity of the Aspen Ideas Festival.
.. Best of luck with that one. Democrats will pocket the concession and continue demagoguing tax cuts for the wealthy as the tax debate begins—only more emboldened for having tasted blood.
.. the goal of this left-right assault isn’t simply to defeat the health-care bill but to sink pro-growth tax reform too.
.. Republicans won’t be in a stronger position after they’ve shown they can’t win the class-warfare argument.
.. The larger progressive ambition is to make it too much trouble to ever again cut marginal tax rates for individuals or businesses to grow the economy
.. A coterie of Beltway conservatives wants Republicans to repudiate their post-Reagan economic principles and return to their former status as tax collectors for the entitlement state while embracing right-wing income redistribution with child tax credits and family-leave subsidies.
.. The reason is to increase the stock of capital and improve the incentives for capital formation, which in turn increases labor productivity, wages and job creation.
.. Cutting the rate on capital income to 20%—it was 15% as recently as 2012—is a major increase in the return on investment and 3.8 points is close to half of the eight-point cut in the Bill Clinton-Newt Gingrich budget deal of 1997. That reform helped propel the 1990s boom
.. repealing the surtax would increase employment over the decade by 133,000 jobs and increase the size of the economy by 0.7%. After-tax earnings across the bottom 60% of the income distribution would be about 0.65% higher than they would otherwise be. Combined with a successful tax reform, workers could see a big pay raise for the first time in years