Trump Has Signed The Republican Tax Bill Into Law — Here's What To Read About It
This post was updated throughout on December 22.
President Trump has signed the Republican tax bill into law after it was pushed through Congress earlier this week.
The law delivers a legislative victory to President Trump and will reshape the American economy in ways both large and small. To understand what's at stake, we've compiled nine of the best analyses of the bill and how it will affect Americans rich and poor.
What's In — And Out Of — The Final Republican Tax Plan
After countless proposals — from making grad students pay income taxes on tuition waivers to letting religious organizations endorse political candidates — you'd be forgiven for not knowing what exactly is in the final bill. The Atlantic provides a helpful rundown.
Most people will see small reductions in the rate they pay. The bottom rate stays at 10 percent, rising to 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and finally 37 percent for income above $500,000 for individuals and $600,000 for couples. (The comparable current rates are 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent.)
The biggest change was the last one Republicans made, in which they decided to reduce the top marginal rate to 37 percent from 39.6 percent — lower than either the House or Senate originally proposed. There's a big catch to all of these rates, however: To get the plan under $1.5 trillion in cost, Republicans have set them all to expire at the end of 2025, meaning Congress will have to act before then to extend them.
Will Your Taxes Go Up Or Down In 2018 Under The New Tax Law?
Many news sites have published calculators or interactives to help readers figure out how the bill will impact their pocketbooks. Our favorite is the Washington Post's, which is simple, elegant and easy to use.
The House and Senate are expected to pass the final version of the tax bill this week, and most Americans are expected to see an immediate tax cut in 2018.
But how much of a cut? Individual tax situations are, of course, different. But for most people, the answer will boil down to four factors: How much you earn, your filing status (including children), where you live and whether — and how much — you itemize deductions.
The Best Way To Spur Growth? Help The Poor, Not The Rich
If you're not a policy wonk, you might think that the idea of growing the economy for everyone by giving top earners and corporations tax cuts seems pretty reasonable. Bloomberg Businessweek's Peter Coy takes the theory behind trickle-down economics seriously and explains why cutting taxes for the rich helps the rich and only the rich.
[Y]ou don't need a Ph.D. in economics to see that something's wrong with trickle-down theory. If it were true, inequality would be self-limiting. As soon as the rich started getting richer, wealth would cascade like the Niagara down to the benighted lower classes. Instead, the gap between rich and poor keeps growing.
Galbraith, in 1982, pointed out the asymmetry of trickle-down theory, which contends that poor people don't work more because the safety net is too comfortable, while well-off people don't work more because their taxes are too high. Mischievously, he described trickle-down theory as follows: "The poor do not work because they have too much income; the rich do not work because they do not have enough income. You expand and revitalize the economy by giving the poor less, the rich more." That kind of says it all.
What Would Reagan Think Of The GOP's Tax Law?
Congressional Republicans won't find much succor if they look for support from the National Review, where former Reagan speechwriter Ben Elliot takes aim at Republicans' tax priorities today:
Reagan's first principle was to dedicate tax rate reductions to the American people — individuals first, corporations second. In the 1980 campaign, Reagan repeatedly told his audiences, "We're the party of Main Street, not the party of the corporation board room and the country-club set. Let's tell the cop on the beat and the shopkeeper."
And he did. Both the 1980 tax reductions and the 1986 tax reform focused on bold rate reductions for individuals, including millions of mom-and-pop enterprises — the little engines of innovation and job creation — that paid taxes on their earnings through the individual income tax and represented over 90 percent of all small businesses. Corporations also benefited from new incentives for research and development and the right to write off immediately new investments for equipment and technology.
An 11th-Hour Raid By The Wealthiest Baby Boomers
It's clear that the Republican tax plan represents a transfer of wealth from the poor to the rich. What's less obvious, but no less true, is that it also represents a transfer of wealth from the young to the old. The Atlantic's Ronald Brownstein minces no words about "the generational implications of the tax legislation" in this short but powerful essay.
One of 21st-century America's central dynamics is that an increasingly non-white workforce will be funding Social Security and Medicare for a rapidly growing number of white seniors as the baby boomers retire. These bills strip the public treasury exactly as that burden is intensifying — and they do so primarily by enriching some of those same boomers. That will steadily heighten pressure to cut those benefit programs.
Tellingly, though, the "Better Way" budget blueprint House Republicans released last year proposed delaying changes in Medicare until 2024, when almost all of the baby boom has already retired. That would leave younger generations, starting with Generation X, to bear most of any future cutbacks — even as they shoulder the costs for the boomers' more generous retirement.
CEOs Have Already Started Pocketing The Windfall
Trump and congressional Republicans claim that the corporate tax cuts in their bill will encourage job creation and benefit workers. But corporations have already begun using the legislation to drive up stock prices and increase executive compensation — hardly helping out the little guy.
U.S. corporations are already beginning the process of pocketing the winnings from the tax bill jackpot they expect to hit any day now, undercutting, in a remarkably public fashion, the pretense that the corporate tax cut will lead to greater investment in job creation.
Since the Senate passed its version of the tax bill on December 2, 29 companies have announced $70.2 billion in stock buybacks, a maneuver that uses company cash to buy its own shares, which then drives up the price of those shares, rewarding major investors and executives whose compensation is directly tied to the company's stock price.
We're Witnessing The Wholesale Looting Of America
Vox's Matthew Yglesias ties the tax legislation, which benefits Republican donors, to a larger breakdown of political norms in Washington under Trump.
Somewhere in its murky origins, "tax reform," as conceived by is Republican authors, was supposed to be a policy-driven bill aimed at creating a simpler and fairer tax code that would generate broadly superior economic outcomes for most people — a normal governing objective even if it was always the case that substantial disagreement would exist over the merits of marginal corporate tax rate cuts as a growth-boosting policy.
But along the way, virtually all of the high-minded aspirations were dropped and all of the normal aspects of congressional process broken — to the point where the bill's leading architects won't even mention the policy changes that are at the heart of the bill. In the end, instead of taking on the special interests as promised, it gives away the store to almost every lobby shop in town — with last-minute additions that personally enrich the Trump family and a decent chunk of the members of Congress voting for it.
[Vox]
The Media Still Doesn't Know How To Cover A Bankrupt GOP
The tax law is, we hope it's clear by now, a policy disaster that will hurt all but the very richest Americans. So why aren't people talking about it all the time? New Republic's Alex Shephard explains how Republican lawmakers are capitalizing on ignorance, confusion and the unprecedentedly crowded news cycle to try to push through their unpopular tax bill.
Republicans enjoy two advantages they didn't have when they attempted to repeal Obamacare over the summer. The first is that the last month has featured a number of high-profile, evolving news stories — most notably the fallout from the Harvey Weinstein sexual harassment scandal — that have shifted to new figures on a practically hourly basis. This allows a less explosive issue like tax policy to fly below the radar…
The other advantage is that the effects of the tax reform bill are more complicated than the effects of Obamacare repeal. Obamacare repeal had stark repercussions that activists, politicians, and the media could latch onto: It would cost 24 million people their health insurance. The tax reform bill, meanwhile, effectively sticks middle-class taxpayers with the bill for massive corporate tax cuts after giving those same taxpayers modest income tax decreases. The mechanisms involved are complicated — tax policy combined with the arcane rules of the Senate do not exactly make for thrilling cable news coverage. And because the House and Senate bills are so different, journalists and networks have struggled to convey what's happening.
I'm A Depression Historian. The GOP Tax Plan Is Straight Out Of 1929.
Just in case you're not scared enough, here's a piece pointing out just how many times throughout history Republicans have tried to pass tax cuts of this scope, and how badly things have turned out each time around.
In 1926, Calvin Coolidge's treasury secretary, Andrew Mellon, one of the world's richest men, pushed through a massive tax cut that would substantially contribute to the causes of the Great Depression. Republican Sen. George Norris of Nebraska said that Mellon himself would reap from the tax bill "a larger personal reduction [in taxes] than the aggregate of practically all the taxpayers in the state of Nebraska." The same is true now of Donald Trump, the Koch Brothers, Sheldon Adelson and other fabulously rich people.
During the 1920s, Republicans almost literally worshiped business. "The business of America," Coolidge proclaimed, "is business." Coolidge also remarked that, "The man who builds a factory builds a temple," and "the man who works there worships there." That faith in the Market as God has been the Republican religion ever since.