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Column: The biggest tax scam in history

What’s happening in the U.S. Senate right now really does deserve Trumpian superlatives

By Paul Krugman

New York Times News Service

Published on November 29, 2017 12:01AM

Protesters shout their disapproval of the Republican tax bill outside the Senate Budget Committee hearing room on Capitol Hill in Washington, D.C., Tuesday.

AP Photo/J. Scott Applewhite

Protesters shout their disapproval of the Republican tax bill outside the Senate Budget Committee hearing room on Capitol Hill in Washington, D.C., Tuesday.


Donald Trump likes to declare that every good thing that happens while he’s in office — job growth, rising stock prices, whatever — is the biggest, greatest, best ever. Then the fact-checkers weigh in and quickly determine that the claim is false.

But what’s happening in the U.S. Senate right now really does deserve Trumpian superlatives. The bill Republican leaders are trying to ram through this week without hearings, without time for even a basic analysis of its likely economic impact, is the biggest tax scam in history. It’s such a big scam that it’s not even clear who’s being scammed — middle-class taxpayers, people who care about budget deficits, or both.

One thing is clear, however: One way or another, the bill would hurt most Americans. The only big winners would be the wealthy — especially those who mainly collect income from their assets rather than working for a living — plus tax lawyers and accountants who would have a field day exploiting the many loopholes the legislation creates.

The core of the bill is a huge redistribution of income from lower- and middle-income families to corporations and business owners. Corporate tax rates go down sharply, while ordinary families are nickel-and-dimed by a series of tax changes, no one of which is that big a deal in itself, but which add up to significant tax increases on almost two-thirds of middle-class taxpayers.

Meanwhile, the bill would partially repeal Obamacare, in a way that would sharply reduce aid to lower-income families and raise the cost of insurance for many in the middle class.

You might wonder how such a thing could possibly pass the Senate. But that’s where the scamming comes in.

While the underlying structure of the bill involves raising taxes on the middle class, the bill also includes a number of temporary tax breaks that would, at first, offset these tax increases. As a result, in the first few years most middle-class families would see modest tax cuts.

But the operative word here is “temporary.” All of these tax breaks either dwindle over time or are scheduled to expire at some point; by 2027 the bill is, as I said, a tax increase on the middle class used to pay for tax cuts that mainly benefit the wealthy.

Why would anyone write a bill full of provisions that evaporate over time? There’s no economic or policy logic behind it. Instead, it’s all about trying to have it both ways, making a safe space for political double talk.

Here’s how it works: If you point out that the bill hugely favors the wealthy at the expense of ordinary families, Republicans will point to the next few years, when the class-war nature of the plan is obscured by those temporary tax breaks — and claim that whatever the language of the law says, those tax breaks will actually be made permanent by later Congresses.

But if you point out that the bill is fiscally irresponsible, they’ll say that it “only” raises the deficit by $1.5 trillion over the next decade and doesn’t raise deficits at all after that — because, you see, those tax breaks will expire by 2027, so the tax hikes will raise a lot of revenue. By the way, the claim that middle-class taxes will rise is crucial to passing the bill: Only bills that don’t raise deficits after 10 years can bypass the filibuster and be enacted by a simple Senate majority.

The point, of course, is that these claims can’t both be true. Either this bill is a big tax hike on the middle class, or it’s a huge budget-buster. Which is it? Nobody really knows; probably even the people who wrote this monstrosity don’t know. But someone is being scammed, bigly.

Oh, and ignore claims that tax cuts for corporations would jump-start the economy and pay for themselves. Of the 42 ideologically diverse economists surveyed by the University of Chicago on the impact of Republican tax plans, only one agreed that they would lead to substantial economic growth, while none disagreed with the proposition that they would substantially increase U.S. debt.

So it’s a giant scam. And while the exact nature of the scam may be unclear, ordinary American families would end up being the victims either way.

For suppose those temporary tax breaks did end up becoming permanent, so that the budget deficit soared on a long-term basis. Then what? You know the answer: Republicans would suddenly revert to the pretense that they’re deficit hawks, and demand “entitlement reform” — that is, cuts in Medicare, Medicaid and Social Security, programs that ordinary families depend on. In fact, they’re already talking about those cuts — they’ve started the switch even before getting the suckers to take the bait.

So will they manage to pull off this giant con job? The reason they’re rushing this to the Senate floor without a single hearing, without a full assessment from Congress’s own official scorekeepers, is their hope that they can pass the thing before people figure out what they’re up to.

And the question is whether there are enough Republican senators with principles, who believe that policies should not be sold with lies, to stop this bum’s rush.



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