The Weiner Component V.2 #45 – Implications of the New Tax Bill

Official Portrait of President Ronald Reagan

Official Portrait of President Ronald Reagan (Photo credit: Wikipedia)

Official portrait of United States Senator (R-KY)

Official portrait of United States Senator (R-KY) (Photo credit: Wikipedia)

On Friday, 12/5/17, under Mitch McConnell’s leadership the Senate went to work on a final edition of the so-called 1,000 page Tax Reform Bill.  Apparently they were willing to work through the night of December 6; but finished the bill at about Two A.M.  McConnell

worked with individual Senators changing sections of the bill to meet their objections.  The final version contained multi crossed out sections and pages and innumerable changes written in in pencil, hand written in the margins.  In addition there were sections added by lobbyists, including one by McConnell benefiting distillers of alcoholic beverages.  Apparently Kentucky, where McConnell comes from, has a large number of distilleries.  It should be noted that no one in the Senate had read through the final version of the bill before it was voted on.

 

The Democrats requested that a vote not be taken on the bill until the following Monday so that they could read it before voting on the potential law.  This was refused.

 

With one exception McConnell just had the necessary votes to pass the bill.  It was passed strictly on a party bases.  Ninety-nine Senators were present.  Fifty Republican Senators voted for the bill.  One Republican Senator, Bob Corker of Tennessee, voted against it because it would add one trillion or more dollars to the National Debt.  All the forty-seven Democratic Senators plus the two Independents voted against the bill.

 

While the Republican Senators were very pleased with their accomplishment the Senate’s version of Trump’s idea of Tax Reform, while essentially similar in content to the House of Representatives bill, was still very different from their proposed law.  In order for this bill to become law both versions have to be identical.  They were far from that point.

 

What happened was that a Conference Committee, composed of members of both political parties from both Houses of Congress met, with the Republicans in the majority, and they worked out a compromise bill made up of the two versions which, in turn, went back to both Houses of Congress and be voted upon.  It was further worked upon and passed both Houses of Congress and the President several days later signed it and the bill will become law in January of 2018.

 

The problem here was that the House of Representatives is made up of a Republican majority which consists of very extreme conservatives like the Freedom Caucus to relatively moderate Republicans.  The Democrats are totally opposed to this bill.  The Bill continued getting modified until it gained support from all Republicans.

 

In the Senate the Republican majority currently is one Senator.  One Republican Senator, Bob Corker of Tennessee who is retiring from the Senate in 2018, was against the bill.  He was pacified and changed his vote when a section was added allowing him to keep more from his real estate holdings.  Republican Senator Susan Collins of Maine was having second thoughts about the bill   She also was pacified with promises.  The Bill passed.

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Prior to the above vote there was also a special Senate election in Alabama to replace Jeff Sessions, the Attorney General, on Tuesday, December 12th.  The Republicans ran Roy Moore, an accused pedophile who attempted a sexual encounter with a 14 year old high school student when he was a 32 year old Assistant District Attorney.  Several other women have accused him of similar actions when they were 16 or older.  In Alabama the age of consent is 16.  Moore initially admitted knowing some of these women and then denied having met any of them.

 

Alabama elected a relatively liberal Democrat?  The governor of the state has said that she considers Moore guilty but will still vote for him.  The state is mostly evangelical.  The majority of the population is very conservative.  The Republican candidate, Roy Moore lost by over 20,000 votes but has refused to concede the election.

 

This will give the Democrats 49 votes and the Republicans 51 votes in the Senate.  The Democrats requested that the vote be held off until the Democrat, Doug Jones, takes his seat.  The Republicans refused and had the temporary Republican appointee vote.

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On a broad basis the Tax Bill will present a giveaway to the large corporations and the upper stratum of society.  Trump, himself, will save multimillions of dollars after the bill is passed.  It will slash the top corporate tax rate from 35 percent to 20 percent.  In addition it will cut the upper income tax rate individuals pay from 39.6% for an income of $418,488 or more and for 39.6% for married couples earning $426,700 or more to $1,000,000 or more.  This one action will seriously reduce the amount of money collected in income taxes and massively reduce the percentage paid in taxes by the upper percentile of the population.

 

While most of the traditional deductions will be gone or seriously reduced there will be new ones that can be used by the upper echelon and the corporations.  For example a tuition deduction for private schools or for a future college education for children will probably be instituted.  Also companies will have their entire costs of automation deductible.  The tax bill will allow companies to deduct their entire expenditure on robots that replace workers.

 

The Secretary of the Treasury, Steven Mnuchin, had been promising to release an analysis of the Trump or Republican Tax Plan.  Instead he issued a one page memo upon the effects of the proposed new taxes.  Presumably in massive studies, which the Treasury people deny ever happened, the tax bill will generate enough new revenue to pay for the tax bill and add an additional 300 million over a decade.  Tax policy experts have called this into question.  “This is not a serious analysis effort,” stated Mark Mazur, director of the Tax Policy Center.

 

The governments of several European nations have also issued warnings that sections of the new tax bill interfere with international trade agreements and could disrupt it.  There has been no real analysis of the effects of this bill by any group, partisan or nonpartisan.

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The pattern of Supply Side Economics which the Bill uses as its basis was first espoused by President Ronald Reagan and his administration from 1981 through 1989.  Reagan took the United States, which in 1981 was the largest creditor nation in the world and in eight years turned it into the largest debtor nation on the planet.  During that period the National Debt grew from 997 billion dollars to 2.85 trillion dollars.  He was able to do this with what was then called Supply Side Economics.

 

His philosophy was to reduce government spending, reduce federal income and capital gain taxes, and reduce government regulation.  This would grow the economy.  When companies got more cash they would hire more workers and expand their businesses and produce additional products which would generate more taxes.  In essence if Supply were increased so would consumption grow.  It didn’t quite work that way.

 

People will expand their purchasing when they have more income.  Reagan gave the biggest income increases to large companies and the upper echelon of society.  The companies produced their goods based upon demand.  They didn’t increase production and assume they could sell as much as they produced.  Supply Side Economics was a myth; it never came about in the real world.  People whose incomes were increased put that money into old industry like the stock market.  There was no real expansion of new investment.

 

This was Reagonomics.  The next two Republican Presidents, George H.W. and George W. Bush both cut taxes mostly for the rich and greatly expanded the National Debt with their wars.  The Democratic President, who came between those two, President Bill Clinton, lowered taxes for everyone, expanded the economy, and began reducing the National Debt in the last years of his presidency.

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We now have Donald Trump as President of the United States and both Houses of Congress are controlled by Republican majorities.  If one looks at a political map of the United States the Republican controlled states and electoral regions with the states are all marked in red and the Democratic controlled states and regions within the states are marked in Blue.  The most populous state within the United States is California which is mostly a blue state.  Then come New York and Florida, both having the same number of Congressmen.  After that there is Texas.  The other states all have smaller populations.  The various individual deductions that the new tax bill has done away with mainly effect the larger Democratic states where people itemize their deductions.  This would be California and New York.  The Republicans have built into the bill a form of punishment for Democrats who are mainly members of the middle class.  Their taxes will actually rise with this so-called tax reform.

 

Florida is a purple state on a political map, containing large numbers from both political parties and Texas is a red state.  The group that will be most affected by the tax reform will be retired senior citizens.  The Senate bill does away with the requirement to belong to Affordable Health Care.  This will cause premiums to rise significantly as the younger generation will opt not to join.

 

In addition Congress will need to help pay for the tax cuts.  Paul Ryan, the Speaker of the House and Senator Marco Rubio have both indicated that money will have to come from entitlement programs.  It has long been a Republican goal to privatize Social Security and Medicare.  This may well be the chance the Republicans have been waiting for.

 

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