Republicans keep talking up the tax cut. Maybe they should stick to other accomplishments (are there some?) because the tax cuts aren’t doing what Republicans said they would. And that criticism is not coming from the left.
Consider the Wall Street Journal’s report:
The U.S. economy slowed down in the first quarter. That isn’t a surprise, but considering the stimulus hitting the economy it counts as disappointment.
Economists had thought that 2018 was off to a solid start. In early February, forecasters polled by Macroeconomic Advisers expected gross domestic product would grow at a 2.7% annual rate in the first quarter. But a series of disappointing reports on consumer spending pushed estimates lower. Economists in the Macroeconomic Advisers poll now estimate Friday’s first-quarter GDP report from the Commerce Department will show the economy expanded at a 1.7% rate after growing 2.9% in the fourth quarter last year.
Wasn’t the tax cut going to usher in 3, no 4, no make it 5 percent growth? Remember that “the first quarter was when the tax cut took effect, raising the take-home pay of many Americans in addition to sharply reducing corporate taxes. That ought to have boosted consumer spending, but apparently it wasn’t enough to offset the temporary factors weighing on the economy in the first quarter.”
Well, at least the tax cuts went to the middle class. What’s that? Oh, it didn’t, as The Hill reports:
Much of the tax benefit from the new tax law’s deduction for pass-through businesses will go to wealthy individuals, according to a Joint Committee on Taxation [JCT] report released Monday.
About 44 percent of the tax benefit from the deduction will go to those with income of $1 million or more in 2018, and 52.4 percent of the benefit will go to those with income in that range in 2024, the congressional tax scorekeeper estimated.
Democrats during the tax debate complained about the bill for exactly this reason. Now, the conservative Washington Examiner acknowledges: “The idea behind the deduction was that it would allow mom-and-pop shops — sole proprietorships and partnerships, for instance — to continue competing against corporations that would enjoy the new 21 percent corporate tax rate.” However, as we knew at the time, “the vast majority of small businesses are pass-throughs, not all pass-throughs are small businesses. Some, including law firms, hedge funds, and other big partnerships, are major businesses. Some outside analysts criticized the GOP tax bill on the grounds that the new pass-through break would mean big tax cuts for high earners and big companies.” Some outside analysts (evidently not the ones Republicans consulted) had it right.
Jared Bernstein, former chief economist for VP Joe Biden tells me, “The JCT findings are totally expected, as we knew that more than half of pass-through income accrues to the richest 1 percent of tax filers. My concern is that this estimate represents a lower bound because this change opens up a huge new tax-avoidance incentive to redefine regular earnings as pass-through income.” He added, “Yes, there are guardrails against this, but they’re very weak.”
But at least the tax cuts paid for themselves, just as Republicans promised? Oh, no. Not by a long shot the Congressional Budget Office told us. CBO told us that with the tax cuts: “Deficits would be larger by an average of a full percentage point of GDP, rising by a total of $2.6 trillion to yield a cumulative deficit of nearly $15 trillion over that period. And debt held by the public would reach about 105 percent of GDP by the end of 2028, an amount that has been exceeded only once in the nation’s history. Moreover, the pressures contributing to that rise would accelerate and push debt up even more sharply in subsequent decades.”
To sum up, the tax cut haven’t as yet juiced up the economy; the pass-through gimmick was a huge sop to the rich; and the cuts ballooned the debt. (By 2028 our debt-to-gross domestic product ratio will be more than 96 percent.) Republicans really should stop talking about a policy that missed the mark as wide as this one and remains so unpopular. (Gallup found 39 percent approve, 52 percent disapprove.) Rather than coast the rest of the year Republicans might try passing something this year (protection for “dreamers?”An infrastructure plan?) that is genuinely popular.