Robert Robb: There is a meaningful middle-class cut in the tax reform bill. But, because of the filibuster rule, it disappears after eight years.
Republicans seem on their way to passing a major tax reform bill. But they have already lost the public debate about it.
And for that, they have the filibuster rule to blame.
Democrats characterize the legislation as a huge tax break for corporations and the wealthy, financed through a tax increase on the middle class. Polls show most people accept that characterization.
That’s not, however, how the bill starts out.
Middle class wins – until 2025
The Tax Policy Center is a joint enterprise of the Brookings Institution and the Urban Institute. Its tax distribution research is generally accepted and cited by the left.
According to the center, in the first year of the bill as passed by the Senate, the middle class would get a pretty hefty tax cut. In the middle quintile of income earners, roughly $50,000 to $90,000, 88 percent of filers would receive a tax reduction that averages more than a thousand dollars. That’s not chump change.
That remains true through 2025, when the center projects that 86 percent of middle-income filers would receive an average tax break of $1,250.
However, the middle-income tax break disappears after that. In 2027, the center finds that 62 percent of middle-income filers would actually see a tax increase of an average of $130.
So, why the big distributional change between 2025 and 2027? The things in the bill that reduce middle-income taxes – the doubling of the standard deduction, the reduction in individual tax rates, the increase in the child tax credit – expire after 2025.
Hence the argument that the middle class is picking up the tab for tax breaks for corporations and the wealthy.
Why didn’t they make cuts permanent?
The House and the Senate have passed different versions of President Trump’s tax reform bill so now it goes to a conference committee. Here’s what that means.
Republicans protest that this isn’t fair. That the individual tax cuts won’t actually be allowed to expire after 2025. They will be extended.
So, why have those provisions expire if that’s not the desire or the intent?
The filibuster made them do it.
While there is a middle-class tax cut in the bill, at least initially, the main goal is to reduce the corporate income tax rate substantially. There aren’t Democratic votes to be had for that endeavor.
ROBB: John McCain did not sell out on tax reform
So, to avoid the filibuster, Senate Republicans have to go the budget resolution route. A tax bill pursuant to reconciliation with a budget resolution isn’t subject to the filibuster.
However, the budget resolution had to go through the Senate Budget Committee, where Republicans have only a one-vote majority. And one of those votes is Bob Corker, a deficit hawk. Corker negotiated a limit on what tax reform could add to the national debt of $1.5 trillion over 10 years. A cent more than that, and the bill is subject to the filibuster.
There is also something called the Byrd rule that says that anything done through reconciliation can’t increase the federal debt beyond a 10-year window. You can pile up debt to the sky for 10 years. But do so in the eleventh, and the filibuster applies.
The filibuster rule changed the debate
President Donald Trump and GOP leaders wanted the lower corporate rate to be permanent. To avoid the filibuster, that meant that the individual tax cuts had to disappear to comply with the Byrd rule, even though Republicans don’t mean it.
Consider how much different this debate would be if the Senate filibuster rule didn’t exist. The Republican president and Congress would enact whatever tax changes they think best for the country, which would prevail until some future president and Congress decided to change them.
There would be no argument that the bill didn’t contain a meaningful middle-class tax cut. That would be as true in 2027 as in 2025 and 2019.
The score by the Congressional Budget Office, another unproductive ritual, would show a greater increase in the national debt. And that would be a fair discussion.
I don’t like the tax reform bill. I think it leaves individual income tax rates too high and effectively forecloses reducing them in the future. And I think pro-growth tax reform that reduces the national debt is possible. The Simpson-Bowles Commission pointed the way.
But the policy and the debate shouldn’t be distorted by the contortions necessitated by the filibuster rule.
The filibuster rule makes Republicans look stupid and disingenuous. They don’t need the help.
Reach Robb at firstname.lastname@example.org.
MORE FROM ROBB:
3 fundamental flaws in the House’s tax bill
Andy Biggs’ letter proves why tax reform is doomed
Why did Obamacare repeal fail? Blame the filibuster
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