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House Republicans’ second tax cuts estimated to add $3.8 trillion to deficit
On September 28th, House Republicans passed a new round of tax reductions by a 220-191 vote. The new bill would make permanent the individual and small-business tax cuts under President Trump’s signature law that were originally set to expire in 2025.
Following Republican’s tax overhaul last year, the “Tax Reform 2.0” is expected to further blow up the federal deficit by almost $3.8 trillion over the next two decades, according to the Tax Policy Center, a centrist think tank.
Passing the House Bill just five weeks before midterm elections is a strategic move on the Republicans’ part to remind voters of Trump’s signature legislative achievement.
Republicans frame the tax legislation as upholding the interests of workers, middle-class families and small businesses.
“This relief goes to middle-class families and low-income families working their way up,” said Rep. Kevin Brady (R-TX), chairman of the Ways and Means Committee “Who do you trust: Washington to spend your money, or you and your family?”
During last year’s debate over the GOP tax plan, Democrats focused their criticisms on how the tax cuts permanently slashed the corporate tax rate while only issued temporary reductions in individual filers’ rates. The package, they claimed, disproportionately benefitted the nation’s largest companies. Forcing Democrats to vote against the new bill that addresses exactly the problem they raised would give Republicans a solid ground for attack.
Such tactic indeed coerced three Democrats into a “yes” vote. Red-state Democrats Rep. Jacky Rosen (D-Nev) and Rep. Kyrsten Sinema (D-Ariz) are both facing tough Republican opposition in their race for Senate seats. Rep. Conor Lamb (D-PA) comes from a heavily Republican district in Pennsylvania and scored a razor-thin special election upset in March by maintaining a relatively conservative policy platform.
Sinema explains in a statement that her vote is mending a past legislative mistake: “Last year’s tax bill failed to provide permanent tax relief for middle-class families and small businesses. Today’s bill rectified that issue and that’s why I voted yes.”
To be sure, last year’s Tax Cuts and Jobs Act sided with the nation’s wealthiest. It not only scaled back the highest rate from 39.6 percent to 37 percent, but also raised the threshold for the top rate from $470,700 for married couples to $500,000 for individuals and $600,000 for married couples.
It was also the largest one-time reduction in the US corporate history. Big businesses’ tax rate permanently dropped straight from 35 percent to 21 percent and the cut is expected to amount to $1 trillion over the next ten years.
Add to the fact that Trump has since escalated his trade wars with both China and U.S. allies, hitting Washington and all export-oriented states hard. Whatever relief the cuts provided average Americans was offset by a dramatic decline in export revenues.
Perceived as a giveaway to the ultra wealthy, the GOP tax reform remains unpopular. The polling data computed by RealClearPolitics shows consistently more opposition than support for the legislation. The difference between approval and disapproval rates peaked at 22 percent right before the law took effect on January 1st.
However, despite Republicans’ desperate attempt to portray the new bill as an advocate for the middle class, in reality it still overwhelmingly favors America’s richest families.
As reported by the Tax Policy Center, under the new package taxpayers in the bottom income quintile would receive an average cut of only $100, while those in the top 1 percent are expecting a massive cut averaging $40,000.
It is not surprising that House Minority Leader Nancy Pelosi (D-Calif) discredited the bill as a “warmed-over stew of trickle-down economics”.
“The GOP’s priorities have been laid bare,” she said. “How can we milk the public, exploit the taxpayer by adding to the wealth of the wealthiest one percent?”
Democrats also fear the bill’s potentially devastating effects on Social Security and Medicare.
“When the bill finally comes due, I’m terrified Republicans will pay for it by cutting Social Security and Medicare,” said Rep. Linda T. Sánchez (D-Calif.).
The Senate has no intention to vote on the bill due to solid Democratic opposition there. Sen. Pat Roberts (R-Kan.), a Senate Finance Committee member, made clear that there would be no hearings or markups.
Featured Image via AP Photo/Evan Vucci