Another Republican trying to justify a hug tax cute for the rich...

Nancy Pelosi's Tax Apocalypse

By RICH LOWRY

To listen to the Democrats, the American middle class will be lucky to survive the Republican tax bill.

Nancy Pelosi calls the bill “monumental, brazen theft from the American middle class,” and that’s one of her more restrained comments. Per Pelosi, the bill is an affront to the Founding Fathers, veterans, children, and all that is good and true in America life.

She constantly charges that the bill “raises taxes on 86 million middle-class households,” and “hands a breathtaking 83 percent of its benefits to the wealthiest 1 percent of Americans.”

This is a rhetorically potent line of attack that the polling suggest has made considerable headway. It just isn’t remotely honest. Far from “pillaging the American middle class,” the Republican bill is, every factual analysis agrees, an across-the-board tax cut. (YEA.. Great. I get $2.00. the Millionair down the street get $100,000!!!)

Pelosi’s seemingly damning factoids come from the year 2027, an odd date to focus on, since it’s not when the bill goes into effect, but when part of it lapses. In 10 years, many of the tax cuts on the individual side expire. This means that the middle-class tax cuts go away, which Pelosi portrays as a Republican plot to loot the middle class. (Because the tax cutes used by the rich don't go away. They get to benifit forever while the poor get a tax hike)

It’s a very strange argument against passing a bill to say horrible things will happen once the legislation no longer fully applies. This is more logically a case for extending the bill than for blocking it. Indeed, it is almost certain that the middle-class provisions would eventually be preserved. (This is one reason Republicans were willing to let the individual tax cuts sunset and not the corporate tax cuts.)

If Pelosi were being more scrupulous, she’d say, “If 10 years from now, Democrats for some reason don’t agree with Republicans to extend the middle-class tax cut — then they will go away and it will be shame on us.”

What is, by the way, this looming middle-class wasteland in 2027? Pelosi is relying on the liberal Tax Policy Center for her figures. As that outfit puts it, “on average, in 2027 taxes would change little for lower- and middle-income groups.” Oh.

According to the TPC, the lowest quintile of “tax units” would see, on average, a $30 tax increase in 2027. The second quintile would see a $40 increase. And the middle quintile a $20 increase.

There’s a reason that Pelosi doesn’t want to focus on the TPC’s numbers when the tax bill she so vociferously opposes is fully in effect. In 2018, 80.4 percent of tax units get a tax cut, averaging $2,140. A grand total of 4.8 percent will see a tax increase. The small percentage of people who will get a tax increase is disproportionately tilted toward the top of the income scale.

There isn’t really debate over the broad contours of the bill. According to the analysis of the Joint Committee on Taxation, the average tax rate goes down for every income cohort in 2019, and the share of federal taxes paid by millionaires will rise slightly to 19.8 from 19.3.

It is true that upper-income people get a bigger tax cut in terms of absolute dollars than anyone else. This is going to be true of any across-the-board tax cut because the wealthy tend to pay more in taxes than anyone else.

Brian Riedl of the Manhattan Institute points out, “The bottom 80 percent of families currently pay 33 percent of all combined federal taxes, yet will get 35 percent of the tax cuts. By contrast, the top one percent currently pays 27 percent of all federal taxes, but will get just 21 percent of the tax cuts. This means the share of all federal taxes paid by upper-income earners will slightly rise.”

The tax bill is hardly invulnerable to criticism. Republicans talk as if the plan was always conceived as a middle-class tax cut, when the real action has always been on the corporate side. Corporate tax cuts aren’t popular — the signature provision of the GOP bill is a reduction in the top rate from 35 percent to 21 — but they are pro-growth. There used to be a bipartisan consensus that we needed corporate tax reform.

President Barack Obama supported going down to 28 percent (although he wanted to raise more revenue overall). Former President Bill Clinton has spoken in favoring of lowering the rate for years. He points out, correctly, that the U.S. rate of 35 percent once wasn’t such a standout. It became unsustainably high when almost every country in the Organization for Economic Co-operation and Development besides us cut their corporate taxes over the past two decades.

Then, there’s the question of the deficit. Republicans can fairly be taken to task for budget gimmicks (like the expiration of the individual tax cuts) that squeeze a much bigger tax cut into a $1.5 trillion 10-year window. All things being equal, economic growth will diminish some of the revenue loss. But the bill could have been smaller and added less to the deficit.

This wouldn’t matter so much if the Republicans had a politically plausible strategy to reduce the growth of entitlements. They don’t, and the same Democrats complaining about red ink now will fight savagely to preserve the automatic spending that contributes most to the U.S. debt.(Social Security and Medicare are pay by a payroll deduction, IT IS NOT PART OF THE INCOME TAX! It has no effect on the budget since it is paid for by a payroll deduction...)

It’s impossible to say how the tax bill will play in the midterms. What’s a certainty is that, contra to Pelosi’s histrionics, the middle class will emerge intact, and with a lower tax bill.