The Trump tax law has big problems. Here’s one big reason why

My Comments: I take no pleasure in paying taxes. But I also understand why it’s necessary.

My life as a tax paying adult, especially when it comes to earned income, has seen good and bad years. I’ve always assumed it’s my responsibility to figure out what to send the IRS and if I can’t, then seek professional help.

My life as an economist has taught me that debt can be OK, but too much of it leads to other problems that often have bad outcomes. I believe that will be the case of the tax law signed by Donald Trump in 2017. The unintended consequence will be a massive and debilitating increase in the national debt.

It was touted as a way to generate more tax revenue by causing a surge in corporate income resulting from people like you and I having more money to spend. Fat chance of that happening.

It’s benefits largely accrue to the wealthy which probably means an increase in income inequality in this country. I want you to look at countries in the Middle East and tell me which ones have a growing middle class. It’s difficult to find one, isn’t it? That’s because the ruling elite make most of the money while the rest of herd somehow just manages to get by.

And that’s where we are going until and unless someone comes along to fix it.

January 15, 2019 – The Center for Public Integrity

There’s no shortage of agenda items for the new Congress that’s just been seated in Washington. But lost among the anguished cries to reopen the government and enact ethics reform will be a lesser-advertised but crucial item: addressing major problems in the 2017 tax bill that President Donald Trump signed into law a year ago.

That the law needs fixing is not in dispute. Why it needs fixing is most vividly illuminated by contrasting it with another massive piece of tax legislation, the Reagan-era Tax Reform Act of 1986.

In the months leading up to passage of the 2017 tax act, Trump administration officials and Republican leaders in Congress giddily compared the scope of their bill to that very law. House Ways and Means Committee Chairman Kevin Brady, R-Texas, called their new bill, “the first action in 31 years since President Reagan’s reforms in 1986.” Then-National Economic Director Gary Cohn said the legislation represented the “most significant tax reform legislation since 1986.”

Measured by the magnitude of changes to the tax code, that is true. But in terms of how the bills were developed, deliberated and drafted by Congress — not to mention their substance — the bills could not be less alike. And therein lies an illuminating — some would say frightening — story.  

To wit, the 1986 bill took two years to create, with lawmakers holding dozens and dozens of hearings and taking testimony from thousands of witnesses. The process was a classic reminder, almost like those “How a bill becomes law” charts in school textbooks, of how Congress, with fits, starts and seemingly endless deliberation, inches its way toward final legislation.

Contrast that with the Trump tax bill, which, driven by threats from big GOP donors, was rushed from introduction to passage in just 51 days, leaving no time for substantive deliberation or negotiation — nor even a full understanding of how much debt it would create. Even some Republican tax experts are dismayed by the speed at which the legislation galloped through Capitol Hill — people like Dana Trier, a highly-respected tax tactician from the Reagan and George H.W. Bush administrations whom the Trump administration recruited in spring 2017 to work on the bill.

“If you are like me and experienced the 1986 act, you really realize nobody can get tax legislation close to right anyway,” Trier said. “But this [2017 tax bill] is worse — there is no question about it in my view — than the 1986 act.”

The Trump bill was created in secret, and many legislators never saw some of its provisions, much less debated them, until it was introduced. The measure contained multiple provisions that don’t do what was intended and may take years to fix — if they can be fixed at all, experts say. (SEE: By all accounts, Trump’s tax law is badly broken).

Because the measure was passed on a purely partisan basis (not one Democrat voted for the bill), it is unlikely that Democrats will be inclined to repair it, policy experts say. And, because of its errors, the tax legislation likely will add far more to the U.S. deficit over ten years than the $1.5 trillion the bill was designed to cost, jeopardizing the nation’s credit rating and fueling fears of cuts in Social Security and Medicare. Indeed,after spending more than a year insisting that the law must not run up the nation’s debt, Republicans added more to the debt with this legislation than any single tax bill in the past three decades, records  show.   

“We know the more quickly Congress tries to move on something, the more prone they are to making mistakes and to writing a bill that has unintended consequences,” said Molly Reynolds, an authority on congressional procedure at the Brookings Institution.

The 1986 and 2017 tax acts also differ in more substantive ways. The main thrust of the 1986 legislation was to end the tax breaks that had tilted the playing field toward corporations and the rich, while cutting tax rates for all. And the 1986 bill did all this in a way that did not create more federal debt.

The 2017 law does modestly cut taxes for the lower and middle classes, but its main beneficiaries were the rich and corporations. And the law actually created more loopholes and tax breaks, experts say, favoring those who can afford pricey accounting help. Ed Kleinbard, former chief of Congress’ nonpartisan Joint Committee on Taxation, which assesses tax legislation Congress proposes, called the law a “Christmas present to the donor class” and “an abomination.”

Many academics fear what the tax law will create. “Many of the new changes fundamentally undermine the integrity of the tax code and allow well-advised taxpayers to game the new rules,” wrote 13 professors of tax law in a December 2017 critique as the law sped toward approval. “We must aim to learn from this recent historical episode, wherein a rushed and secretive process resulted in deeply flawed legislation.”

Democratic lawmakers howled their protests. “I must say that with the passage of [the bill], we have hit rock bottom. No hearings. No witnesses. No amendments accepted by majority party or the minority offering. No regular order. No bipartisanship,” said then-Rep. Joe Crowley, D-N.Y., during a House Ways and Means Committee markup of a follow-up bill in 2018. The 2017 tax bill, he said, “was rammed through this committee and rammed through the House of Representatives.”

To counter accusations that their bill was passed on speed-dial and was strictly partisan, Republicans say the bill was six years in the making. They relied on bipartisan research and hearings, they say, conducted from 2011 to 2014 by Democratic Sen. Max Baucus of Montana and Republican Rep. Dave Camp from Michigan. Back then, Baucus chaired the Senate Finance Committee and Camp headed the House Ways and Means panel, yet they could not persuade a divided Congress to take up their tax reform ideas.