Mike Koponen: Tipton incorrectly characterized the Tax Cuts Act
November 27, 2017
I was disappointed, but not really surprised, by how Mr. Tipton portrayed the Tax Cuts Act being rushed through by the Republicans in his article in the Nov. 22 Steamboat Today. Mr. Tipton parroted the talking points of his party in falsely calling this a win for the low- and middle-income levels and not just tax cuts for the rich and corporations.
Here are some points to consider in what I believe to be Mr. Tipton's incorrect characterization of the Tax Cuts Act.
Mr. Tipton references what he refers to as the "nonpartisan" Tax Foundation for some of his figures. The Tax Foundation portrays itself as non-partisan, but it is a Washington, D.C.-based think tank that describes itself as an independent tax policy research organization and is known to advocate for policies that support big corporations. Its models predicating the outcome of the Tax Cuts and Jobs Acts have been criticized by numerous financial experts as being based on flawed assumptions and the Tax Foundation has not provided full documentation on their models (imagine that).
The people behind this bill are teasing lower- and middle-income Americans with short-term tax cuts and not sharing the longer-term implications. The nonpartisan Tax Policy Center group's analysis of the legislation found that while all income groups would get a tax cut from the bill in the short term, more than 50 percent of Americans would see a tax increase in 2027 under the bill.
The promise of economic stimulus is also over hyped. According to the IGM Forum survey of 42 academic economists by the University of Chicago’s Booth School of Business, only one economist agreed that “US GDP will be substantially higher a decade from now” than under the current baseline. In fact, 52 percent disagreed or strongly disagreed that the bill would lead to significant economic growth and 36 percent did not know.
Backers say corporations will take the tax savings to hire more workers and increase salaries. Corporations are already experiencing record profits and not hiring or increasing salaries. Why would they now? Corporations only hire and increase output if consumer demand increases, and this bill does nothing to boost wages enough to increase demand for goods and services.
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The Senate bill would not come close to paying for itself and significantly increases the deficit. The University of Pennsylvania, using its Penn-Wharton Budget Model to assess the budgetary effects of the bill, found that the bill would increase the federal deficit by $1.327 trillion over the first 10 years after it becomes law. So much for Republicans being fiscally conservative.
Last, but more importantly, Mr. Tipton neglected to let everyone know that the since the Tax Cuts Act will increase the deficit so much, it will provide the Republicans the excuse they are looking for to demand cuts to Medicare and Medicaid. The current House and Senate Republican budgets propose these huge tax cuts, while gutting Medicare and Medicaid. The budget would raise the Medicare eligibility age to 67 and cut the program's budget by almost $500 billion. Its cuts to Medicaid are even more massive – up to $1.5 trillion.
The bottom line is the Republicans are pushing this through with no hearings, no debates and no public input because their big donors want it (they get the bulk of the benefits), Trump wants some sort of victory after a year of embarrassments, and it will provide a convenient excuse to gut Medicare and Medicaid. Not good for seniors and our younger generation's future, but who thinks about that when there are big wealthy donors to keep happy.