Victory for the GOP: Senate passes tax reform bill

With a 51-48 vote the U.S. Senate, on Wednesday, approved a sweeping tax reform bill, the first in 30 years, and what supporters, are calling “historic” and a chance to increase both jobs and income for American families, despite polls that show those that the bill purports to help, believe that it is solely designed to help wealthy corporation and individuals.

It’s a boon for the Trump Administration as it limped along for the last ten months without a legislative victory, seeing most of its efforts shot down in appeal courts, dying in committee, or getting congressional nays, respectively with the travel ban, and the attempt to repeal the Affordable Care Act.

After what was considered a rocky start with defectors in both chambers, from both original intent, and also with genuine concerns, they eventually succumbed to party loyalty, and a desire to show in 2018, that not only could they legislate, but they could do so in a long sought after area, thus the “:aching for a victory” that some in the press noted.

This path to the midterm elections is now a rallying call for Democrats to tailgate onto their victories in Virginia and Alabama, and the public’s distrust of the bill, to score big, and take some of the joy from the jubilant faces that were shown on the South lawn of the White House, as President Trump held sway.

On Tuesday elated members of the U.S,. House of Representatives voted, in an overwhelming vote of 227-203, to pass their version that like its Senate counterparts offers steep cuts to corporations and wealthy individuals, and also claims to be a bill that offers Americans fatter paychecks; as Speaker of the House Paul Ryan says will give the people of the United States their money back, “because after all it’s their money.”

“The bill, which marks the largest tax overhaul in 30 years, would permanently slash the corporate rate from 35 percent to 21 percent, a reduction Ryan, President Trump and other Republicans say will lead to investment, new jobs and economic growth,” noted The Hill.

Others are less sanguine pointing out that the tax cuts are dependent on who you are and where you live, and how you file your tax returns. For working families the modest tax cuts will expire in a decade due to Congressional rules that harness any tax cuts to a limit of $1.5 trillion dollars.

While the bill comes in a hair underneath the limit, many polls have revealed how deeply unpopular the bill, titled the “Tax Cuts and Jobs Act,” is; in fact 64 percent of Americans oppose the Act and say that it favors the wealthy, and 76 percent for corporations, more than it does the average American; especially families living in high tax states,such as New York and California.

Sen. John Cornyn (R-Texas), asked why the bill polled poorly, even while in final conference, pointed to misinformation” and “lying.”“So many people are lying about it, for one thing. ... Unfortunately that sort of information tends to get around faster than the truth, so it’s our job to try to tell the truth about it,” he said.

On the House side, Rep. Greg Walden (R-Oregon), said, “I don’t think we’ve done a good job messaging.”

As it inched towards final form, the House version, as well as the Senate, and now the final law, chipped away at the state and local tax deduction that many middle-class families depend on, which now has a cap of $10,000.dollars.This has stung many residents in high tax states, (New York, New Jersey, and California) which as we have noted before, held high Democrat majorities that voted for Clinton in 2016, and has  especially stung them, as critics noted; in fact, the only House defector was Rep. Rodney Frelinghuysen from New Jersey.

“The average household would get a tax cut of $1,610 in 2018, a bump of about 2.2 percent in that average household's income, according to a report released Monday by the Tax Policy Center, a nonpartisan think tank that has been critical of the tax overhaul plan,” says National Public Radio.

Most searing of those figures is that “however, extremes make averages, and the benefits would be much larger for richer households. A household earning $1 million or more would get an average cut of $69,660, an income bump of 3.3 percent. Compare that with the a tax cut of $870, or 1.6 percent, for the average household earning $50,000 to $75,000.”

For those that itemize on their returns, approximately 28 percent of all filers, then the odds that what was previously gained, will be a lot less.

“No Democrats have backed the tax bill at any time, which would have been a surprise at the beginning of the year.  The House revote is the latest evidence of just how shoddily written the GOP tax scam really is,” said House Minority Leader Nancy Pelosi (D-Calif.).”

A bonus for the GOP was the repeal of the individual mandate for the ACA, colloquially known as Obamacare, that required all Americans to have health insurance, or to pay a penalty. While most received a subsidy for coverage, there was a number of high earners that did not qualify for help, and paid the higher premiums (now part and parcel of healthcare in America) but yelped at the price, despite having higher than average incomes.

As we have noted before, “According to the Congressional Budget Office (CBO), the repeal of the individual mandate penalties could result in as many as 13 million fewer Americans having health insurance. About 5 million are projected to be people who previously bought health insurance as individuals either within or outside the ACA’s marketplaces. Some will choose not to buy insurance because the penalty has disappeared. Others, especially higher-income individuals who don’t qualify for subsidies under the ACA, will drop insurance because of increases in average premiums predicted by the CBO.”

Politico noted the following from the president’s remarks: “When the individual mandate is being repealed, that means Obamacare is being repealed. Because they get their money from the individual mandate,” Trump told reporters during a Cabinet meeting at the White House. “Obamacare has been repealed in this bill.”

“Yet while the bill removes the requirement that individuals must possess health insurance, large portions of the law would remain intact, though others have been weakened during the Trump administration,” they emphasized.

The Harvard Business Review said, “It will mean less health insurance for individuals; less coverage for elderly and poor Americans; less revenue for doctors, hospitals, and myriad health care businesses; and, quite possibly, a less-healthy, less-productive workforce.”

“These premium increases will occur because, with the repeal of the mandate, many young, healthy people will exit markets, leaving a sicker, more costly insurance pool behind. Older individuals will be most affected. For example, a 60-year-old not receiving subsidies could face premium increases of $1,781, $1,469, $1,371, and $1,504, respectively, in Alaska, Arizona, Nevada, and Maine,” they concluded.

Additionally, The GOP saw an opening to slash at what they have long-called entitlements, and the opportunity to delete the mandate also urged them to go further: with further cuts,“Because Medicare and Medicaid together accounted for about $1.25 trillion in federal spending in 2016, about 30% of the federal budget, they will be the major targets for deficit reduction”

While there is no guarantee that they would succeed (although they have Ryan’s support) but these,“reforms could take a number of directions. For Medicare, this could include increasing the eligibility age from 65 to 67 or beyond (resulting in fewer covered elderly), caps on spending per beneficiary (possibly reducing covered benefits), or increases in cost-sharing that would lead to beneficiaries using fewer services. For Medicaid, reforms would likely lead similarly to fewer people covered, reduced benefits, and/or higher cost-sharing.”

With the devil being in the details, one area to pay close attention to are those expiring tax cuts. For example, as NPR noted, “the bill changes tax rates across income brackets, increases the standard deduction and increases the child tax credit — but only until the end of 2025. As a result, the Tax Policy Center predicts that in 2027, the average tax cut would amount to $160, or just a 0.2 percent income bump,” hardly a long-term solution.

“This would mean a tiny tax bump for many lower- and middle-class households — the average $50,000 to $75,000 — earning household would have a tax bill that is $30 higher than today. The average household earning more than $1 million would get a cut of more than $23,000,” they continued.

While Sen. Marco Rubio of Florida was able to increase the child tax credit from $1,100 to $1,400 dollars the push also comes with a cost of other health reductions that hurt other populations, an aspect that many might have not been aware of in the rush to get the bill through Congress, and to President’s Trump’s desk.

“The proof will be in the paychecks,” said Ohio senator, Rob Portman, but the details don’t suggest that there will be sustained increases.

On the job front, most critics have noted that Ryan and others are returning to the old David Stockman, (budget director under Ronald Reagan) mantra,that the “trickle down” will result in greater job creation, and benefits, an argument, long discredited, even by Stockman.

Previous temporary reductions resulted not in job gains, but rewards to stockholders, and in this case many are saying that this could be another benefice, and for middle income earners who invest in a retirement plan that is stock heavy, gains might be seen.

Most are predicting that fewer than 339,000 jobs over a decade will come from the House predictions, with 925,000  predicted from the Senate version; now merged into one bill, some are saying maybe 250,000, at best guess.

While the top rate of 39.6 percent has been decreased under the bill to 37 percent, only one-third of all Americans believe this will benefit them in the long run.

The president’s Council of Economic Advisers predicted a $4,000 salary increase for the average worker, but that seems wildly optimistic, to many economists. For a family of four, with a median income of $73,000, the tax cut would be $2.059.

A poll this Monday from Monmouth University said that 26 percent disapprove of recent tax bills. And 50 percent say they will go up,and only 14 percent believe will go down. Yet, Ryan insists that “Results are what’s going to make this popular.”