November 30, 2017
On November 29, 2018, while on one of his public speeches to rally his base, President Donald Trump said the Republican-controlled congress was going to pass a tax bill that “will be really, really special”. He is right, but not in a good way.
According to a new report just released by the Joint Committee on Taxation (JCT), a bipartisan committee charged to do the analysis by the Senate Committee on Finance, the bill will increase Gross Domestic Product (GDP) output for the by about 0.8 percent more over the next ten years. That is unfortunately only one-third of the cost of the other aspects of the bill, mostly a series of tax cuts that favor corporations and wealthy. All of those together will add around $1.5 trillion to America’s debt.
The 'Tax Cut and Jobs Act', as it is called, at this writing includes these changes in the tax code, most which sound good but for the most part are pure benefits for the rich and for companies:
Even without the new law’s tax cut gifts to corporations and the wealthy, the rate of U.S. debt growth is so high that major Wall Street bank Goldman Sachs sent out a warning on November 30 that U.S. debt will soon hit unsustainable levels. The bank further stated in their announcement that the debt, as calculated as a ratio of GDP, is at the highest level it has ever been since 1950. Goldman further raised the alert that “The tax reform bill and spending increases that are making their way through Congress should increase the deficit further, raising it from 3.2% of GDP in 2016 to 5.1% in 2021.”
Goldman also signaled that a major stock market correct would likely be coming starting as early as 2019.
Trump and his allies in the Republican congress keep saying the tax cuts will pay for themselves, using the ludicrous logic that if companies pay less taxes they will invest more in themselves and raise salaries (which would increase spendable income). They have already acknolwedged that they will not do that. With that -- call it 'crazy' -- assumption as their basis for the figures, the White House in fact projected a 3 to 5 percent faster growth rate in the next ten years than what came out in the JCT results.
That ‘voodoo economics’, to borrow a Reagan era catch phrase, turns out to be dead wrong. The Tax Policy Center, the Tax Foundation and the Committee for a Responsible Fiscal Budget came in with figures which back up the high-risk, high-debut increase scenario predicted by the JCT analysis.
And as to the Republicans that most people will see a tax cut under the current bill proposal, that is far from true. According to the same JCT analysis only 44% of taxpayers would see tax savings by more than $500 in 2019. 38 percent taxpayers would either pay about the same amount in taxes as now or get a tax hike.
As of this writing, the bill is going through some adjustments related to the debt increase, but it still looks like it has a good chance of passage. It will be “really, really special”, as President Trump put it, especially as it further broadens income equality in the United States and further bankrupts the American economy.
The JCT report referenced here is available for download at: https://www.jct.gov/publications.html?func=startdown&id=5045. It is an automatic download.