jimnyc
12-04-2017, 05:18 PM
Seven Myths About the GOP Tax Reform
When the history of the current year in American history is written, the passage of the 2017 tax reform bill will likely take a very large role.
After a decade of economic contraction and listless growth, Americans demanded a new set of policies that would “make America great again.” And Republicans responded by passing a dramatic overhaul to the tax code that aims to break the hold of what liberal economists call “secular stagnation.”
The passage of the bill was greeted by the unedifying spectacle of the Democratic opposition, many in the mainstream media, and many leading economists joining to mislead the public about the Republican tax proposals. It played out almost as a Shakespearean play-within-a-play. But instead of Hamlet’s production of a play about the assassination of a king, we saw the blue-checkmarks of economics and budgets performing a miniature version of the resistance-without-regard-for-truth that has been performed by America’s orthodox elites ever since Donald Trump’s election.
Many of the reports about the tax plan, however, are demonstrably false. Others are not even wrong. Below are the top seven myths that critics of the tax overhaul have put forward–and the evidence that disproves them.
MYTH #1: They’re cutting taxes on millionaires while raising them for the middle class and the poor.
FACT: Middle-income Americans are the biggest winners under the tax bill.
Despite the ocean of ink and cloud-stuffing pixels spilled out to prove this point–and the more hyperbolic critics have described the tax bill as “class warfare” against the middle class and the poor–it is obviously wrong. The Senate bill, for example, cuts taxes for every income bracket and slashes the tax bill for nearly all taxpayers. In fact, middle-class Americans would see the largest deductions in their tax bills.
Here are the facts, all according to the nonpartisan Joint Committee on Taxation.
Middle-income Americans win the most. People earning between $40,000 and $70,000 would see their tax bills falling by 7.1 percent. People with incomes between $20,000 and $30,000 would see a 10.4 percent decline in their tax bills. Millionaires get just a 5.3 percent cut.
And most middle-income Americans win. Eighty-one percent of taxpayers earning between $50,000 and $75,000 get a tax cut under the Senate bill, according to the JCT. For people earning between $75,000 and $100,000, 84 percent get a tax cut. The same with those earning $100,000 to $200,000. Just 80 percent of those earning a million dollars or more get a tax cut.
A lot of families will owe no taxes at all. Most married couples with children earning less than $60,000 per year will have no income tax liability at all. That’s because under the Senate bill, the child tax credit rises to $2,000 per child. (Note, this is not from JCT but from the MarketWatch tax calculator.)
It’s actually the wealthy that disproportionately pay higher taxes under the bill. Very few people tax increase under the Senate bill, and those people are disproportionately wealthy. According to the JCT, just 10 percent of taxpayers earning between $50,000 and $75,0000 will get a tax increase under the Senate bill, largely from the loss of some deductions. That number is actually probably too high, however, because it was done before Senator Susan Collins of Maine proposed an amendment to preserve the deduction for state and local property taxes up to $10,000. For lower levels of income, the numbers are much smaller. In the $20,000 to $30,000 range, for example, just 5.6 percent will see taxes rise. Around 19.2 percent of millionaires, however, will pay more in taxes because of the loss of deductions.
One of the reasons critics of the tax cuts say the bill actually raises taxes on the middle class is that many of the cuts to individual tax cuts are set to expire after 2025 in order to comply with Senate budget rules. And it is true that if those tax cuts were allowed to expire, then taxes would go up for many Americans. But there’s no reason to expect Congress will allow the tax cuts to expire, particularly if Republicans keep control of either the House or the Senate. You don’t have to take our word for it, though. The New York Times explained all this years ago: temporary tax cuts are typically extended or made permanent.
When opponents of the tax bills say the expiration dates mean the Senate bill hikes taxes on the middle class, they’re not telling the truth.
MYTH #2: Tax cuts will blow up the budget deficit.
FACT: Budget deficits depend on economic growth, not tax policy.
Many journalists have demanded that Republicans accept the projections of The Joint Committee of Taxation will result in an additional $1 trillion of federal debt over the next decade. Others site the more conservative Tax Foundation projection of around $500 billion in taxation. But Republican leaders, including Susan Collins and Majority Leader Mitch McConnell, are right to reject these demands.
The forecasts of budget deficits are not facts–they are forecasts. Senators who refuse to kowtow to them are not denial reality, they are refusing to make policy based on often unreliable projections (which are built on obviously flawed models).
Budgetary projections are notoriously unreliable because of uncertainty over factors such as interest rates, employment, and inflation. “In every year between 1992 and 1999, all forecasters underestimated the two-year growth in economic output,” the CBO said in its 2007 assessment of its own forecasts, the forecasts of so-called Blue Chip economists, and those of the executive branch. “Between 2004 and 2006, all three forecasters expectations for real output growth proved too optimistic; however, the errors in the Administration’s forecasts and the Blue Chip consensus were smaller than those in the forecasts that the CBO made during those years.”
Longer term forecasts, such as those that look out five years or more, have often been way off base due to unexpected shifts in productivity. “Five year forecasts of the growth of real GDP made between 1991 and 1999 were too pessimistic. On average, actual growth exceeded all three forecasts’ projections of growth by more than a percentage point. Those errors largely resulted from the investment boom of the late 199s,” the CBO reported.
In the following period, from 2000 to 2003, the CBO and other forecasters went the other way: overestimating the five-year average growth. And in almost every period, the CBO over-estimates long-term interest rates because it always assumes that interest rates will move back to “historical levels” and that higher deficits lead to higher interest rates. Both these assumptions are wrong. Long-term interest rates have been in decline since the early 1980s and rising budget deficits–even the enormous rise we witnessed following the financial crisis–have been accompanied by falling long-term rates.
The budget deficit is largely a function of economic performance, which is uncertain. When the economy booms, budget deficits tend to be lower because government safety-net expenditures are lower and revenue from taxes on profits and income rises. When economic growth is slow or the economy contracts, budget deficits tend to be higher.
The budget forecasts, however, are largely a function of historical economic performance. When growth has been good, the forecasts are too optimistic. When it has been bad, they’re too pessimistic.
We do not even have to look back to ancient history to see forecast errors by the official budget trackers. In 2016, the CBO said the United States economy would grow by 2.7 percent and the yield on 10-year Treasuries would be 2.8 percent. Instead, the economy grew by a paltry 1.6 percent and the 10-year averaged 1.84 percent for the year, never rising above 2.5 percent.
In fact, the CBO budget projections outside of just a two year window are no better than randomly throwing darts and the longer term projections can be changed by small changes to assumptions about interest rates and productivity. This does not mean we should not have a CBO or a JCT. It’s valuable to have projections and over time these can become more accurate. But it means that journalists should not cite the forecasts as if they were facts. Or pour scorn on political figures who refuse to accept the forecast.
In this case, Republican leaders have very good reason to doubt the official forecasts. First, the projections claim that there will be little to no additional growth from the tax cuts. That claim depends on the assumption that the Federal Reserve will push back against growth by raising rates. Second, the projections appear to make the error of simply assuming that weak productivity and investment trends of the past decade continue–the same mistake of fighting the last war that the official forecasts make time and time again. Third, a small upside deviation from the projection–increased growth of just 0.4 percentage points higher–would erase the projected deficit.
To put it differently, if the official projections are too low by a full percentage point–as they were back in the late 1990s–we will be worried about what to do with our mounting budget surplus.
Finally, on a more technical note, the $1 trillion budget deficit forecast is an artifact of the law rather than reality. It assumes that nearly $500 billion in expiring tax cuts would be allowed to expire if not for this bill. But that’s unlikely or at least unknown. So the actual amount of revenue lost because of these particular tax cuts is overestimated.
MYTH #3: Millions will lose health insurance.
FACT: Ending the Individual Mandate does not take insurance away from anyone or make insurance unaffordable.
The Senate bill removes the Obamacare individual mandate. According to the Congressional Budget Office, this means that 13 million additional Americans will be uninsured in 10 years than would be if the mandate stayed in place. The overwhelming majority of these people do not lose insurance, however, they simply do not buy insurance because they are no longer forced to buy insurance.
Ironically, the CBO even said that these people would be losers under the tax cuts because they would lose the benefit of the subsidies for health insurance. That’s not because they cannot get the subsidies–the bills do not cut those at all. In fact, they will likely lead to increases in the subsidies. It’s because people who do not buy insurance do not get the subsidies for buying insurance. Saying they “lose out” is like saying I lost $20 because I didn’t buy a $100 television on Black Friday when they were 20 percent off. Sure, I didn’t get the sale but I have an extra $80 in my pocket and do not own a television I did not need.
There is a risk that premiums could rise somewhat when those freed from the mandate leave the individual market. But Senator Susan Collins and others have received assurance from Republican leaders that they will dedicate more funding to subsidize these markets to prevent premiums from rising.
Rest - http://www.breitbart.com/taxes/2017/12/04/seven-myths-about-the-gop-tax-reform/
When the history of the current year in American history is written, the passage of the 2017 tax reform bill will likely take a very large role.
After a decade of economic contraction and listless growth, Americans demanded a new set of policies that would “make America great again.” And Republicans responded by passing a dramatic overhaul to the tax code that aims to break the hold of what liberal economists call “secular stagnation.”
The passage of the bill was greeted by the unedifying spectacle of the Democratic opposition, many in the mainstream media, and many leading economists joining to mislead the public about the Republican tax proposals. It played out almost as a Shakespearean play-within-a-play. But instead of Hamlet’s production of a play about the assassination of a king, we saw the blue-checkmarks of economics and budgets performing a miniature version of the resistance-without-regard-for-truth that has been performed by America’s orthodox elites ever since Donald Trump’s election.
Many of the reports about the tax plan, however, are demonstrably false. Others are not even wrong. Below are the top seven myths that critics of the tax overhaul have put forward–and the evidence that disproves them.
MYTH #1: They’re cutting taxes on millionaires while raising them for the middle class and the poor.
FACT: Middle-income Americans are the biggest winners under the tax bill.
Despite the ocean of ink and cloud-stuffing pixels spilled out to prove this point–and the more hyperbolic critics have described the tax bill as “class warfare” against the middle class and the poor–it is obviously wrong. The Senate bill, for example, cuts taxes for every income bracket and slashes the tax bill for nearly all taxpayers. In fact, middle-class Americans would see the largest deductions in their tax bills.
Here are the facts, all according to the nonpartisan Joint Committee on Taxation.
Middle-income Americans win the most. People earning between $40,000 and $70,000 would see their tax bills falling by 7.1 percent. People with incomes between $20,000 and $30,000 would see a 10.4 percent decline in their tax bills. Millionaires get just a 5.3 percent cut.
And most middle-income Americans win. Eighty-one percent of taxpayers earning between $50,000 and $75,000 get a tax cut under the Senate bill, according to the JCT. For people earning between $75,000 and $100,000, 84 percent get a tax cut. The same with those earning $100,000 to $200,000. Just 80 percent of those earning a million dollars or more get a tax cut.
A lot of families will owe no taxes at all. Most married couples with children earning less than $60,000 per year will have no income tax liability at all. That’s because under the Senate bill, the child tax credit rises to $2,000 per child. (Note, this is not from JCT but from the MarketWatch tax calculator.)
It’s actually the wealthy that disproportionately pay higher taxes under the bill. Very few people tax increase under the Senate bill, and those people are disproportionately wealthy. According to the JCT, just 10 percent of taxpayers earning between $50,000 and $75,0000 will get a tax increase under the Senate bill, largely from the loss of some deductions. That number is actually probably too high, however, because it was done before Senator Susan Collins of Maine proposed an amendment to preserve the deduction for state and local property taxes up to $10,000. For lower levels of income, the numbers are much smaller. In the $20,000 to $30,000 range, for example, just 5.6 percent will see taxes rise. Around 19.2 percent of millionaires, however, will pay more in taxes because of the loss of deductions.
One of the reasons critics of the tax cuts say the bill actually raises taxes on the middle class is that many of the cuts to individual tax cuts are set to expire after 2025 in order to comply with Senate budget rules. And it is true that if those tax cuts were allowed to expire, then taxes would go up for many Americans. But there’s no reason to expect Congress will allow the tax cuts to expire, particularly if Republicans keep control of either the House or the Senate. You don’t have to take our word for it, though. The New York Times explained all this years ago: temporary tax cuts are typically extended or made permanent.
When opponents of the tax bills say the expiration dates mean the Senate bill hikes taxes on the middle class, they’re not telling the truth.
MYTH #2: Tax cuts will blow up the budget deficit.
FACT: Budget deficits depend on economic growth, not tax policy.
Many journalists have demanded that Republicans accept the projections of The Joint Committee of Taxation will result in an additional $1 trillion of federal debt over the next decade. Others site the more conservative Tax Foundation projection of around $500 billion in taxation. But Republican leaders, including Susan Collins and Majority Leader Mitch McConnell, are right to reject these demands.
The forecasts of budget deficits are not facts–they are forecasts. Senators who refuse to kowtow to them are not denial reality, they are refusing to make policy based on often unreliable projections (which are built on obviously flawed models).
Budgetary projections are notoriously unreliable because of uncertainty over factors such as interest rates, employment, and inflation. “In every year between 1992 and 1999, all forecasters underestimated the two-year growth in economic output,” the CBO said in its 2007 assessment of its own forecasts, the forecasts of so-called Blue Chip economists, and those of the executive branch. “Between 2004 and 2006, all three forecasters expectations for real output growth proved too optimistic; however, the errors in the Administration’s forecasts and the Blue Chip consensus were smaller than those in the forecasts that the CBO made during those years.”
Longer term forecasts, such as those that look out five years or more, have often been way off base due to unexpected shifts in productivity. “Five year forecasts of the growth of real GDP made between 1991 and 1999 were too pessimistic. On average, actual growth exceeded all three forecasts’ projections of growth by more than a percentage point. Those errors largely resulted from the investment boom of the late 199s,” the CBO reported.
In the following period, from 2000 to 2003, the CBO and other forecasters went the other way: overestimating the five-year average growth. And in almost every period, the CBO over-estimates long-term interest rates because it always assumes that interest rates will move back to “historical levels” and that higher deficits lead to higher interest rates. Both these assumptions are wrong. Long-term interest rates have been in decline since the early 1980s and rising budget deficits–even the enormous rise we witnessed following the financial crisis–have been accompanied by falling long-term rates.
The budget deficit is largely a function of economic performance, which is uncertain. When the economy booms, budget deficits tend to be lower because government safety-net expenditures are lower and revenue from taxes on profits and income rises. When economic growth is slow or the economy contracts, budget deficits tend to be higher.
The budget forecasts, however, are largely a function of historical economic performance. When growth has been good, the forecasts are too optimistic. When it has been bad, they’re too pessimistic.
We do not even have to look back to ancient history to see forecast errors by the official budget trackers. In 2016, the CBO said the United States economy would grow by 2.7 percent and the yield on 10-year Treasuries would be 2.8 percent. Instead, the economy grew by a paltry 1.6 percent and the 10-year averaged 1.84 percent for the year, never rising above 2.5 percent.
In fact, the CBO budget projections outside of just a two year window are no better than randomly throwing darts and the longer term projections can be changed by small changes to assumptions about interest rates and productivity. This does not mean we should not have a CBO or a JCT. It’s valuable to have projections and over time these can become more accurate. But it means that journalists should not cite the forecasts as if they were facts. Or pour scorn on political figures who refuse to accept the forecast.
In this case, Republican leaders have very good reason to doubt the official forecasts. First, the projections claim that there will be little to no additional growth from the tax cuts. That claim depends on the assumption that the Federal Reserve will push back against growth by raising rates. Second, the projections appear to make the error of simply assuming that weak productivity and investment trends of the past decade continue–the same mistake of fighting the last war that the official forecasts make time and time again. Third, a small upside deviation from the projection–increased growth of just 0.4 percentage points higher–would erase the projected deficit.
To put it differently, if the official projections are too low by a full percentage point–as they were back in the late 1990s–we will be worried about what to do with our mounting budget surplus.
Finally, on a more technical note, the $1 trillion budget deficit forecast is an artifact of the law rather than reality. It assumes that nearly $500 billion in expiring tax cuts would be allowed to expire if not for this bill. But that’s unlikely or at least unknown. So the actual amount of revenue lost because of these particular tax cuts is overestimated.
MYTH #3: Millions will lose health insurance.
FACT: Ending the Individual Mandate does not take insurance away from anyone or make insurance unaffordable.
The Senate bill removes the Obamacare individual mandate. According to the Congressional Budget Office, this means that 13 million additional Americans will be uninsured in 10 years than would be if the mandate stayed in place. The overwhelming majority of these people do not lose insurance, however, they simply do not buy insurance because they are no longer forced to buy insurance.
Ironically, the CBO even said that these people would be losers under the tax cuts because they would lose the benefit of the subsidies for health insurance. That’s not because they cannot get the subsidies–the bills do not cut those at all. In fact, they will likely lead to increases in the subsidies. It’s because people who do not buy insurance do not get the subsidies for buying insurance. Saying they “lose out” is like saying I lost $20 because I didn’t buy a $100 television on Black Friday when they were 20 percent off. Sure, I didn’t get the sale but I have an extra $80 in my pocket and do not own a television I did not need.
There is a risk that premiums could rise somewhat when those freed from the mandate leave the individual market. But Senator Susan Collins and others have received assurance from Republican leaders that they will dedicate more funding to subsidize these markets to prevent premiums from rising.
Rest - http://www.breitbart.com/taxes/2017/12/04/seven-myths-about-the-gop-tax-reform/