Sunday, November 1, 2020

The Trump Tax on the Middle Class That is Coming

President Trump and Senate Majority Leader Mitch McConnell

Lefty economist Joe Stiglitz reports in The New York Times that the middle class is going to face a tax hike next year, thanks to Republicans:

The Trump administration has a dirty little secret: It’s not just planning to increase taxes on most Americans. The increase has already been signed, sealed and delivered, buried in the pages of the 2017 Tax Cuts and Jobs Act.

President Trump and his congressional allies hoodwinked us. The law they passed initially lowered taxes for most Americans, but it built in automatic, stepped tax increases every two years that begin in 2021 and that by 2027 would affect nearly everyone but people at the top of the economic hierarchy. All taxpayer income groups with incomes of $75,000 and under — that’s about 65 percent of taxpayers — will face a higher tax rate in 2027 than in 2019.

It's a typical political sleight of hand. Stiglitz goes on: 

For most, in fact, it’s a delayed tax increase dressed up as a tax cut. How many times have you heard Trump and his allies mention that? They surmised — correctly, so far — that if they waited to add the tax increases until after the 2020 election, few of the people most affected were likely to remember who was responsible.

Looking at the analyses of the nonpartisan Congressional Budget Office and the Joint Committee on Taxation at the time the December 2017 tax bill was enacted, we see very clearly how different income groups are affected by the Trump tax plan. And it’s disturbing...

By 2027, when the law’s provisions are set to be fully enacted, with the stealth tax increases complete, the country will be neatly divided into two groups: Those making over $100,000 will on average get a tax cut. Those earning under $100,000 — an income bracket encompassing three-quarters of taxpayers — will not...

The problem now is that unless the Democrats win a majority in the House and the Senate and clinch the presidency, these Republican tax increases, already legislated, are likely to go into effect. The increases, unfairly aimed at the vast majority of Americans who are disproportionately suffering in the pandemic, will cause even more hardship.

They must be stopped.

Stiglitz is correct, the Republican tax hikes are likely to go into effect if the Democrats don't control Congress and the executive branch. But what Stiglitz isn't telling you is that taxes are likely to be increased even more if Democrats are in control.

As Paul Simon put it in the song Mrs. Robinson:

Going to the candidates' debate

Laugh about it, shout about it

When you've got to choose

Every way you look at this you lose

-RW

2 comments:

  1. But does any tax law stay constant? I'm sure this could change to depending upon administration and the composition of Congress.

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  2. Stiglitz surely knows that the ten-year tax provisions (cuts) expire not because of tax policy considerations but because the budget reconciliation rules require a ten year window -- so that a super majority is required to make permanent tax law changes. Lacking such a majority, the 2017 law was passed to phase out some cuts to make the revenue model look right, with the expectation that Congress would extend these provisions as the time came to do so.

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