Tag Archives: tax reform

Talking Turkey on Tax Plans

Henry Clay Warmoth was a famously corrupt governor of Reconstruction-era Louisiana who never claimed to be anything other than the carpet bagging chiseler he was. “I don’t pretend to be honest,” he said. “I only pretend to be as honest as anybody in politics.”* And, as everyone knows, candor is harder to find in politics than molars in a hen house.

Warmoth would, no doubt, appreciate the truthy-falsey nature of the marketing campaign surrounding tax reform plans currently working their way through Congress. The recently passed plan by the House differs in pretty substantial ways from what’s currently being floated in the Senate, so who knows what specifics will emerge from the legislative difference splitting. Regardless, Republican proponents promise– crossed hearts, pinkie swear and everything—that once all is said and done, as House Majority Leader Kevin McCarthy put it, “Every single American is going to keep more of what they earn.

Well, not every American. Obviously. According to the Joint Committee on Taxation, Congress’ non-partisan bean counter of tolls and tariffs, there’s winners and losers (you can see their report here). The short version is that some Americans–mostly big, important rich Americans–will get to keep a truckload more cash, more than $40 billion of it.  The middle class will get to keep a skosh more, at least until their tax breaks expire. Those earning under $40,000 are–surprise, surprise–being set up to get screwed.

It’s seems accurate enough that most people will get a modest bit of tax relief from the House bill (something on the order of a hundred bucks), but between 1-in-5 and 1-in-3 will actually see their taxes increase a bit. And a good chunk of the actual tax relief is set to turn into a pumpkin in a few years. The modest tax goodies for suckers, um, regular citizens, have an expiration date. This is needed in order to mathematically keep the deficit kraken submerged in a (fake) shallower sea of red ink. So, the number of people who will see their taxes rise as a result of Republican plans will grow over the long term. And who ends up paying more? Hint: If you’ve got more than six zeroes to the left of the decimal point in your checking account, don’t sweat it. The GOP has your back.

You can get a good sense of how the House Republican tax plan will effect Americans as a whole by just looking at what it will do for the roughly 45 people who at least nominally call me boss (they call me a lot of other stuff too, much of which I won’t repeat). I sit at the apex of the mighty knowledge producing machine known as the University of Nebraska’s Department of Political Science. Its employees include professors, administrative staff, adjuncts, teaching and research assistants. No one in this group is a 1 percenter (or even a 10 percenter), but at the top end there’s a group earning a decent upper middle-class income. That group includes me, so lover of lucre I am, I was eager to see how the Republican plan would line my pocket. To do this I used an online calculator designed to give you a rough idea of what your tax burden would look like if the House plan actually became law (there’s several to choose from, the one I used for all calculations in this post can be found here, and you can follow this link to figure out what your own tax payoff might look like).

For me, it turned out not a huge amount, a couple of hundred bucks give or take, with adjustments up or down based on which set of assumed numbers I plugged into the calculator. At the extreme end, punching in the most hopeful (and unrealistic) estimates I could get the calculator to spit out a tax savings for me of about eight hundred dollars. Let’s just round that out to a thousand because it makes the math easier. Using the Warmoth guide to veracity, then, I can honestly say the Republican plan would put an extra grand in my pocket.

Let’s take a look at the other end of the income spectrum in my department. On this thin end of the wage spectrum are teaching and research assistants. These are grad students who get paid a $16,000 annual stipend, plus a tuition waiver. Under current law, the tuition waiver is not counted as taxable income, but under the House Republican plan it is. So, tax relief for these guys means getting taxed on money they never had. The table below shows the difference in their tax bills under current law and the Republican plan.

Yep, their tax bill jumps by about 500 percent, increasing by about two thousand dollars. At least in my little world, then, what the Republican tax plan does is redistribute income from the have nots (grad students) to the haves (me). A thousand dollars translates into about twenty bucks a week. Putting that much extra in my weekly paycheck will have pretty much zero impact on my saving or consumption patterns. Taking two thousand dollars from a grad student is a serious hit—it represents a couple of months of take home pay.

Broadly speaking, this analogy seems to be generalizable. Current tax reform plans in Congress will be a huge boon to the Wall Street crowd, a huge boondoggle for the poor, and people in the middle like me are being offered twenty bucks a week to go along and pretend it’s all a good thing. Unlike Warmoth, though, some of us have met bribes we’re willing to refuse. This tax reform plan is a seriously bad idea. Honest.

Chernow, Ron, 2017. Grant.  New York: Penguin. p. 757