Opinion: What we know about the GOP’s tax plan (hint: not much)

President Donald Trump speaks about tax reform in the Farm Bureau Building at the Indiana State Fairgrounds in Indianapolis, Sept. 27. (Tom Brenner / The New York Times)

Fresh off their failure to pass another Obamacare repeal bill, Republicans revealed a somewhat more detailed framework of the tax reform they plan to pursue next. But there are still more questions than answers.

Let’s be clear about one thing from the outset: The framework lacks some details because it’s intended to be just that — a framework, to guide legislators as they fill in the specifics through the committee process. In other words, it’s not one of those “backroom deals” put together by leadership and “rammed through,” as critics noted about the Senate GOP’s various Obamacare bills. That lack of details leaves it open to criticism by people who will try to persuade Americans to assume the worst about how it will evolve — some of the very same people, in fact, who excoriated Republican senators for not moving Obamacare bills through said committee process. If you attacked Republicans for not using regular order to mold and vet an Obamacare bill, but are now taking advantage of ambiguity in this tax-reform framework to demagogue it while it is being molded and vetted through regular order, you just might be a hypocrite.

With all that said, let’s look at some questions about the framework that need to be answered as it moves through the legislative process.

The general direction is sound: fewer brackets, less complexity (including deductions/loopholes) and lower rates (for the most part — we’ll discuss a possible exception in a moment). But there aren’t enough details to know whether this general direction will work to most Americans’ benefit when the specifics are applied.

An example: The framework calls for doubling the standard deduction, which Republicans have been promoting as a win for working Americans. But it also calls for eliminating personal exemptions in the name of simplicity. In principle, that is a good example of removing complexity; in practice, it means the benefit of a larger standard deduction is lessened. And with the lowest rate rising to 12 percent from 10 percent, that could mean some tax bills go up.

Or maybe not: The framework is silent on such specifics as how far up that 12 percent bracket goes. If it basically replaces the 10 and 15 percent brackets, all the way up to where the current 25 percent bracket begins, that ought to reduce the tax bills of a lot of Americans. But if the 25 percent bracket creeps downward into the current 15 percent level, not so much. The framework also calls for a “substantially higher” child tax credit; that might offset increases elsewhere, depending on how much higher it goes. There’s also a reference to “additional tax relief that will be included during the committee process” to make sure “typical families in the existing 10 percent bracket … are better off.” So we can’t really say what will happen to the tax bills of people at the bottom of the new 12 percent bracket until we see what’s added during the committee process.

The specifics of the child tax credit will be especially important to a lot of working families. A tax credit is a direct reduction in the amount of taxes owed rather than a decrease in the amount of taxable income, as with a deduction or the personal exemption. Based on the current personal exemption for dependents of $4,050, that credit would need to rise by $405 to offset the removal of the exemption in the 10 percent bracket, by $607.50 in the 15 percent bracket, and so on. A higher credit of, say, $1,000 would be basically neutral for those in the 25 percent bracket and a cut for those in the lower brackets. (By “in the bracket” I’m referring to people’s marginal tax rate — what their next dollar of income is taxed at.)

Because we don’t know such details as the income ranges for the new tax brackets and the size of some of these tax credits, you should be extremely skeptical of anyone trying to tell you not only what the proposal would cost (or save) a family, but also what it would do to federal revenues. If you don’t know where the 12 percent bracket ends and the 25 percent bracket begins, you have no way of modeling the effect on individual taxpayers — much less the aggregate effect on the Treasury, and thus budget deficits. Anyone who tells you otherwise is probably trying to pull a fast one on you.

There’s a lot to like about the framework in principle, both on the individual and corporate sides. But those details are going to matter a lot — which is why it’s good to see that Congress will fill them out via the legislative process. And hey, if it works, maybe Congress will figure out it’s not such a bad model for replacing Obamacare either.

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108 comments
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panacifuga

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desiwijul
desiwijul

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dhowardporter
dhowardporter

Kyle, you know...when you say..."Despite efforts by the left to demagogue a tax-reform plan..." you've pretty much gone out of your way to characterize our position without giving us a chance to try to meet the conservatives somewhere in between. Both sides need some wiggle room to maneuver to consider the wants of our supporters while at the same time  give the opposition something as well. You'd think after 7 plus years we'd all have learned that we need to give something in order to get something.  The scorched earth approach just doesn't work.

temixab
temixab

I believe he's saying that if you're such a simpleton that you decide how to vote in elections based on Twitter and Facebook ads you probably shouldn't even be voting.>>>>>>>+*www.2morepath.com


ATLAquarius
ATLAquarius

Getting out in front of this one early....the framework seems like tax cuts not tax reform...I'm sorry it's just a framework

stogiefogey
stogiefogey

One of the guiding principles of the tax plan should be that everyone pays at least something, even if it's only a couple of bucks a year. The ~50% of us who currently aren't net federal tax payers (actually many are tax takers with EITC) should have some skin in the game.

Someone I'm sure will hasten to add, 'yeah but they pay sales tax'.

Caius
Caius

Depends on how they do "regular order".  If they do it behind locked doors that is one thing.  If they do it on C-SPAN so we all can watch/listen that is entirely another.


A note of caution: In 1981 we decided we could reduce government revenue, increase government spending, and balance the budget.

Since then the deficits have totaled $19 trillion.


If Congress comes out and announces that based on this bill the economy is gonna expand and government revenue is going to go through the roof........................  Well put your money in a coffee can and bury it in the backyard.


RoadScholar
RoadScholar

" Not much"

Same for repub Congressmen!

SGTGrit
SGTGrit

Every tax cut or reform from Kennedy, Reagan, Clinton and GWB produced a boost to the economy. Trump's, appears to have the potential for a huge boost which we need.


McGarnagle
McGarnagle

@SGTGrit


There is a potential for a boost. My fear is it will be short lived. Our greed usually gets us in worst shape.

JohnnyReb
JohnnyReb

"From what ive seen its trickle down all over again. It wont work."

Our entire economic system is based on trickle down.

For example, a big construction project yields jobs to a multitude of skills from architects to janitors.

They spend the money in trade, etc.

So all the whining from the Left about Trickle Down is really their crying that they either were too lazy, not smart enough, or just plain dumb by not positioning themselves to partake in the most successful economic system man has ever known.

BTW, those left behind for reasons listed then cry about how the government should take from others and give to them.

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breckenridge
breckenridge

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The company said it also found three accounts from the news site RT — which Twitter linked to the Kremlin — that spent $274,100 in ads on its platform in 2016. 

Fake news! The Russians did not interfere in the 2016 election!

DawgDadII
DawgDadII

We'll, if they influenced your vote you should be investigated.

stogiefogey
stogiefogey

@MarkVV @DawgDadII  I believe he's saying that if you're such a simpleton that you decide how to vote in elections based on Twitter and Facebook ads you probably shouldn't even be voting.

Hedley_Lammar
Hedley_Lammar

BTW most corporations in America dont pay close to the rate they want you to think they do.



Hedley_Lammar
Hedley_Lammar

 Who is going to pick up the tab?


Rich Blue states. They pick up most of the tabs today.

DawgDadII
DawgDadII

Hey, that's what a progressive tax code is all about. Embrace the lunacy you advocate.

irishmafia1457
irishmafia1457

So Puerto Rico was bankrupt and unable to keep up with their infrastructure,  no almost all of it has to be rebuilt . Who is going to pick up the tab? The 50% that actually pay Federal income tax?

Hedley_Lammar
Hedley_Lammar

What we have here isnt so much a tax plan as a few things jotted down on an index card. That is by design. Not so they can fill things in later as Kyle naively assumes, but so they can hide certain parts until they want to reveal them.


From what ive seen its trickle down all over again. It wont work.


But hey Trump will be a good deal richer. Maybe he can buy another yacht ?

BillyRip
BillyRip

This is a tax cut for Trump and his rich friends! That's the BOTTOM LINE, up front!!!

irishmafia1457
irishmafia1457

@BillyRip UHH since the rich pay the vast majority  of Federal income tax who exactly should a tax cut go to? 

breckenridge
breckenridge

@irishmafia1457 @BillyRip 

Are you in the top 5%? No? Then why are you licking their boots?
 

It's a dog eat dog world. The rich could not possibly care any less about how much you pay in taxes.  And there is absolutely no reason you, or any member of the middle class, should give a damn about their tax rate.


irishmafia1457
irishmafia1457

@Hedley_Lammar @irishmafia1457 @BillyRip In 2014, people with adjusted gross income, or AGI, above $250,000 paid just over half (51.6%) of all individual income taxes, though they accounted for only 2.7% of all returns filed, according to our analysis of preliminary IRS data. Their average tax rate (total taxes paid divided by cumulative AGI) was 25.7%. By contrast, people with incomes of less than $50,000 accounted for 62.3% of all individual returns filed, but they paid just 5.7% of total taxes. Their average tax rate was 4.3%. Pew Research  (Forbes)  Households in the top quintile pay over 13 percent of their income in income tax, while those in the bottom quintile pay negative ten percent (they get a tax credit       Don’t answer the foolish arguments of fools, or you will become as foolish as they are   Goodbye cubby

DawgDadII
DawgDadII

On another site there was op-ed about potentially taxing all 401k contributions immediately, "Roth-izing" them all. I say ELIMINATE the taxing of retirement contributions completely, up to the current contribution limits. That would eventually ease a LOT of pressure on Social Security, perhaps making benefit reductions more politically palatable, with people not relying on it as much (saving more) and knowing they'll have more tax-free funds available in retirement. Would add to the incentive for low-wage earners to save more as well. And it would generate a lot of investment capital.

McGarnagle
McGarnagle

I notice JReb a bit upset that poor people have it so good in this economy. Dude, give it a rest.

breckenridge
breckenridge

@McGarnagle 

They have it so easy.  They didn't even walk 12 miles to school in a blizzard on 3 different occasions - they took the bus. Wusses.


They really need to man up.

JohnnyReb
JohnnyReb

@McGarnagle

Upset is the incorrect term.

Do you understand the point?  Let me review.

The issue is, if the child tax credit is increased would those paying zero federal income tax receive the increase amount or be capped at the present amount.

Kyle stated there are those in congress on both sides of the aisle who want to increase instead of cap who use the fact that those not paying Fed tax pay FICA.

That's total BS thinking by those idiots in congress.

FICA is social security and insurance contributions, aka Medicare.  They have nothing to do with child tax credits and should not be used to justify not capping the child tax credit for those paying no fed income tax.

If they don't cap it, they might as well just send them a support check each month with a note to throw out their birth control as uncle sugar will pay for the kids they can't afford.

JohnnyReb
JohnnyReb

The people who pay no federal income tax yet get money from the Feds when filing in April due to Child Tax Credits will under the proposal get even more money?

Is that correct? 

Kyle_Wingfield
Kyle_Wingfield moderator

@JohnnyReb Not sure. The framework says the first $1,000 of the child tax credit will remain refundable (which is why people can receive it even if they have no income tax liability) but implies any increase in the credit would not be. We shall see.

That said, there are people in both parties who think such a credit ought to be refundable since low-income workers pay FICA even if they have no income tax liability.

JohnnyReb
JohnnyReb

@Kyle_Wingfield @JohnnyReb

I don't understand that thought process.

FICA is social security and medicare, right?

Why would anyone not pay that or it be offset with more child tax credit.

The politicians go to Washington obviously to be popular, not do the right thing.

Starik
Starik

@JohnnyReb @Starik @Kyle_Wingfield  As jobs for ordinary workers disappear, those displaced people will have to be taken care of or we'll have lots of trouble. If people don't have money to live decently, can't work to get money they start stealing. The criminal economy is already substantial. 

JohnnyReb
JohnnyReb

@Starik @JohnnyReb @Kyle_Wingfield

That same argument has been used throughout history.

When the car came along it was what will the horse traders, stables and blacksmiths do?

It has been similar with one invention after another making products and skill obsolete.

And there's nothing like an empty stomach to make people improve themselves.

As to stealing, put them in jail.

I had rather pay for them in jail than to send them money to set on their butts and watch the tube.