Billed as a “middle class tax cut,” what’s REALLY in the Republican tax bill? TYT Contributor Ryan Grim talks to Jacob Leibenluft of The Center on Budget and Policy Priorities. Full interview and Q & A.
By Eric Byler
Hours after House Republicans released their tax reform bill, Jacob Leibenluft, a senior advisor at the Center on Budget and Policy Priorities, offered his initial impressions via a live interview with TYT’s Ryan Grim on Facebook.
“As we saw with the health bill, [congressional Republicans’] only path to passing this is for people to not understand what’s in it,” Leibenluft said. “They’re trying to pass a massive bill that’s extremely complicated in a very short period of time, and that’s by design. The goal here is for people to not understand what’s in it.”
Tax cuts that are advertised for middle-class Americans are offset by deductions and exemptions that are taken away, Leibenluft said. The central feature of the bill is a massive windfall for corporations and the economic elite, adding $1.5 trillion to the federal debt. (A subsequent amendment eliminated an excise tax that corporations preferred not to pay, lifting the cost of the bill to $1.574 trillion over 10 years—that’s $74 billion higher than the $1.5 trillion in borrowing limit that would allow a bill to pass the Senate with a simple majority vote.)
That figure would be even higher if not for tax increases on the upper middle class, and policy implications—cuts to education, Medicaid, and Medicare, for example—that will hurt just about everyone else.
The 429-page bill introduced by Rep. Kevin Brady (R-Texas) was praised by House Speaker Paul Ryan (R-Wis.) for phasing out the estate tax. “First of all, it’s a fairness argument,” Ryan told Fox News’ Chris Wallace. “Second of all, it’s a jobs argument. You actually create jobs by getting rid of this death tax.”
The estate tax was first enacted in 1916 to help pay for World War One. In 1977, 139,000 estates were valuable enough to qualify. But, due to subsequent changes to our tax code, that number has plummeted. Of the three million estates in the United States today, only an estimated 5,500, are worth enough that their inheritors would pay any taxes at all under current law.
“I’ve had bagel brunches at my apartment with more people than [pay] the estate tax in a lot of states,” Leibenluft said.
That’s because the current threshold is $5.49 million per individual, or, nearly $11 million for a married couple who inherits an estate. Any value above that threshold is currently taxed at 40 percent. If the worth of an estate is less than that value, its inheritors pay no tax at all.
In order to make the numbers work, House Republicans want to cap or take away existing deductions for things like local and state tax payments, mortgage-payment interest, student loan interest, and donations to colleges and universities. “You’re asking people to give up their tax deduction, their tax benefit, in order for the 5,000 richest people to benefit.”
“Not just the 5,000 richest people, but their kids,” Grim added. “The 40-year-old who’s never done anything with his life and is now going to inherit millions of dollars.”
The House Republican plan would eliminate the estate tax starting in 2024, and it does not tax capital gains passed on as part of estates. The Joint Committee on Taxation estimates that the revenue loss of not taxing capital gains at death would be $179.4 billion over a five-year period, without accounting for the fact that the wealthiest Americans could then hold on to assets until death in order to evade taxation.
Also, Leibenluft pointed out that while the estate tax repeal and corporate tax cuts are made permanent in this bill, the “Family Flexibility Credit” ($300 each for a tax filer and spouse) expires in 2022, resulting in a tax increase for Americans at the median family income.
New York University Professor of Law David Kamen writes that “a family making $59,000 would face a tax increase by 2024 relative to current law, with the tax increase potentially rising to nearly $500 by 2027. This is even as tax cuts for those at the top are maintained.”
Speaker Ryan’s second claim—that jobs will be created if the children of America’s wealthiest families inherit money and assets tax-free, recalls similar claims made about the Bush Tax Cuts of 2001, 2003, and 2004. Recent reporting by TYT revealed that there was widespread disagreement within the Bush administration about whether or not a tax-repatriation holiday would add jobs to the U.S. economy under 2004’s American Jobs Creation Act.
When asked to compare the Trump/Ryan plan to the Bush tax cuts, Leibenluft began by making a distinction. The Bush tax cuts primarily benefited high-income individuals, while the House Republican proposal is more kind to large corporations, he said. Although the Bush tax cuts were grossly “tilted toward the wealthy,” they also had tax cuts for lower- and middle-income people, which made it relatively easy for President Bush and House Speaker Dennis Hastert to argue that all Americans would benefit.
“What we saw, in fact, was that these tax cuts were incredibly expensive,” Leibenluft said. “They didn’t do what was promised for the economy, but politically it was a relatively easy move in the short term because they could sell these across-the-board tax cuts.”
By contrast, the House Republican plan eliminates tax credits and deductions, which makes the “across the board” argument a lot more complicated. Not everything being taken away from taxpayers is bad to take away if you believe in progressive taxation, Leibenluft said. The problem, politically, for President Trump and Speaker Ryan is that the bill gets rid of these deductions and exemptions in order to pay for a massive corporate windfall, and the phasing out of the estate tax, which benefit only a fraction of the wealthiest 1 percent.
With 52 Republicans in the U.S. Senate, Majority Leader Mitch McConnell (R-Ky.) can only afford to lose two Republican votes, and Senators Jeff Flake (R-Ariz.) and Bob Corker (R-Tenn.) have already voiced concerns about the bill’s impact on the federal debt.
“There’s incredible pressure to get something done. That’s pressure that’s being levied by donors,” Leibenluft said. “The flip side is, I think, as the numbers come out on this bill, it will become clear that it doesn’t look all that great for their constituents. . . . You’re asking their constituents to pay more on behalf of people who are doing even better than them.”
Click here for TYT Investigates’ series on Apple’s push for tax cuts.
Click here for TYT Investigates’ series on Fed Ex & UPS’ push for tax cuts as job-creation tools.
Click here for TYT Investigates’ Series: Tax Cuts & Job Creation – Lockheed Martin.
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