OUR FRENZIED FISCAL FUTURE

Often wrong, but never in doubt. ~ Ivy Baker Priest 

So here we are, attempting to figure out how much we may benefit or lose from the ever-changing Republican tax “reform” proposals now winding their way at nearly legislative warp speed through the lobbyist-infested Congress. What is a knowledgeable citizen to do – let alone the vast majority of taxpayers who haven’t a clue about macro- or micro-economic fiscal policies?

Here’s a cast-in-concrete general canon about any change in tax legislation, rules or regulations:

Tax reform always creates winners, losers and unintended consequences.

The winners quietly chortle. The losers loudly cry, complain, moan and commiserate, and hope their public upset will change the rules to lessen their expected torment. Others hope they're not negative unintended consequences. 

I’d suggest we pay some attention now to discussions about who will come out ahead and who will suffer from the Republicans' currently-proposed tax changes. My advice also includes applying a very large discount to the mandated 10-year forecasts that accompany each and every change in federal fiscal policy for the simple fact that making such macro predications are always challenging, and rarely accurate. The Economist posted an assessment of “budgetary crystal balls” that illustrates forecasting’s fallacies. Most forecasters recognize this inevitable problem, but only mention it sotto voce. Outwardly, forecasters firmly stand by their predictions. But as Ivy Baker Priest, a Republican US Treasurer in the 1950s cogently stated, forecasters are “often wrong, but never in doubt.”

Futures that are directly influenced by political dogma and whims, er policy, are especially problematic. The proposed House and Senate tax bills change the principal corporate income tax rate from 35% to 20%, the pass-through rate for subchapter S corps and partnerships drops to 25%.

Intuitively, we can readily realize that despite the Republicans’ unfounded declarations that all this additional corporate welfare will produce higher wages and higher growth (relationships that are not founded on past empirical data), we can understand that businesses and corporations will greatly benefit and most individuals won’t. To recognize these tax changes’ effects we don’t need to rely on complex macro models that involve hundreds of equations and scads of variables – variables in addition to the very necessary but never-talked-about add-factors and mul-factors. 

Nevertheless, such models show that the Republicans’ reforms likely will provide a stunning 67% of the deficit-financed tax benefits to corporations, not citizens, as a Vox article showed. Here’s a summary of that analysis:

Type of Tax Change	Dollar impact over 10 years	Percent of total tax cuts
Individual tax cuts	$3.3 trillion (T)
Individual tax increases	-$3.0 T
Net individual tax cuts	$0.3 T	20%
Business tax cuts	$2.2 T
Business tax increases	-$1.2 T
Net business tax cuts	$1.0 T	67%
Estate tax repeal	$0.17 T	11%
Total tax cuts	$1.5 T

Source: Committee for a Responsible Federal Budget via Vox.

Notice the $3.0 trillion of individual tax increases. Also noteworthy and thoroughly unsurprising is that of 47.5% of the total federal tax reduction will be directed to the top 1% of income-earners. This large share does not include the benefits of repealing the estate tax that will aid only the already-wealthy. The middle 20% of income-earners (aka, the middle class) will receive but 8.7% of federal tax changes (worth on average $320). The Top 0.1%ers will benefit from receiving a disproportionate 25.1% of tax reductions, worth a tidy $278,370. Is this in any way equitable? Not in the slightest.

The Senate bill offers beneficence to high-roller GOP contributors that the House bill does in spades. These dispiriting results are likely to persist when the ultimate legislation has been agreed to by the Congressional conference committee and signed by our deeply-uninformed, don’t-connect-any-dots president. 

There are interesting stories about which slice of the “middle class” will or won’t benefit from the latest version of the House and Senate tax bills; or how residents in high-tax mostly blue states, student-loan holders, future electric vehicle and solar panel purchasers and low-income housing developers will surely suffer. And distressingly, these precursor bills probably have all too much to do with the likely final legislation.

At this point, it’s the many potential losers who are understandably audible. Unfortunately, I remain cynical enough to doubt that individual citizens or worthy causes can motivate any Republican legislator to make reasoned, broadly-beneficial changes to these biased tax change proposals so they can produce more effective and efficient tax policy. Why? Because of flawed Republican dogma and the herds of corporate lobbyists who are now attempting to further twist legislators’ arms and minds.

The Congressional rules that dictate calculating a decade’s worth of impacts are absurd on their face. They’re mostly a cover for false legitimacy. After long-disparaging President Obama’s effective fiscal stimulus legislation in 2009, the Republicans now dismiss any and all concerns about adding at least $1.5T to the national debt. Yet another example of hypocritical political double-speak.

We’ve known since last November that Republican tax reform was unlikely to help many people who need assistance, including countless people who voted for the president. Nevertheless, as Tacitus mentioned several millennia ago, and perhaps reading into the 2017 collective Republican mind, the unknown always passes for the marvelous. The Republican tax reform legislation won't be marvelous for all too many people.