« The Weeds

Five big problems with the GOP tax plan

2017-11-28

Matt and Ezra parse through the many flaws of the tax bill.

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This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
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not with us a, but we've got a great show for you. I working me focusing in on on tax reform, especially the first. I do want to tell you about a couple cool things that are coming one is that we're gonna be doing a kind of year end culinary episode, and we want to hear what you got you're interested in answer your questions, I so, if you're interested in participating go to the weeds Facebook group at leave your questions there. we're gonna, look through them, add decide which ones we pick up, I think can be fine. I think this Polygamy, Morgiana, absurd, say in the long run about were kicking off for the first one, so to go to the facebook. For that even bigger news, or at least news that is more centred on me personally- is that we are launching a weeds newsletter can be a deal email newsletter for people who love the show, people who love palace, I am writing it go to box that calm, slash, weeds and you can sign up there. I set out my first edition on Monday, I'm having lost, in writing it. I am hoping that that all kinds of listeners of the show will subscribe and welfare
Jeff in force. Anyone to subscribe and and the world will be an amazing, an amazing place Speaking of amazing Republicans are pushing this. This tax bill and analyzed the it seems like you have some doubts about it. So I've been doing a lot reporting on the tax will not pass couple days and ivory. been struck, how many new problems, some of them related it acts in some them not related to taxes. It creates. So as always using out on this. Whenever you're looking into new piece of legislation, you have the question of what problems does it's all is it do if it works, and then what problems does it create? right legislation has trade off. Some of you. Gonna spend a bunch of money or raise taxes. There are problems lamentation. There are unintended consequences You're always in this cost benefit. Analysis of is the problem, of the billiard looking at worth the benefit of the billiard looking at. What is really striking to me now having Doug into
republican bill is its main, Thing it is doing that the main benefit, which is really, if you talked republican tax experts. This idea that will induce corporations to invest more here and move plants and profiteer. It's me true, and there should be some benefit from that, but actually lot of speculative, particularly when you take into account what it is like we need to do on the on the other side's. Meanwhile, it creates at least five pre big new problems. Furthermore, about tax policy, some of them are not by thought, be a good thing today to go through these new problems it We pass a tax, but we know we're. Gonna have to deal with in the say. Ten years coming, our journey, which is a specifically the the Senate, were publicly Santa Republican bilaterally and but little House bill is similar, basically identical in its absence There was nothing but somewhat different in terms of that, the trade offs that it makes yes, although creates most, but not all these problems,
what we are talking about, the Senate bill here also sent bill is expected to be the bill. This goes for It is really the gang of his design. Its chosen trade offs are are really the ones the party has take right away. oh, that's? U, because only the Senate bill, at least in theory, can pass reconciliation cell, but let's go through five here, that I want to talk about oriented unbroken that within a bit more detail. What is it creates a bunch of new debt Another is our appeals, individual mandate in Obamacare, cutting of of new healthcare problems. Another is it created new tax cliff coming on down the road, so a ton of uncertainty in the? U S, tax good, going for a nut is it creates the biggest tax fraud loopholes? You could possibly imagine, and then a fifth is body inequality. But but what are we begin on on the deficit. What Matt would you say, is the.
This is a way to think about how much of this is paid for and how much is not here. So I mean what happened was that in an earlier phase of this process, Republicans Hadad negotiation amongst themselves between the p were the more gung ho tax cutters and the people were the more deficit hawkish people and when they came to an agreement on was they would add one point, five trillion dollars to the deficit within the ten year scoring window. So that's a lot. It's nodded insane amount, but it is big, for example, it is bigger than the I'm a stimulus bell right, so every republic I mean. I think we already knew that single verbally? That's actually amazing right to stop if it is bigger, Jesse amount, it adds to the deficit, but not this.
the bill, which is overdue, trailing just the amount of it adds to the deficit is bigger than the stimulus for children and stimulus. Obviously, affordable care act was designed to be deficit neutral. So you know, if you were confused about that somehow, like Republicans, who were complaining about Obama. Adding too much dead, were bullshit right that, like my thumb, corker, who was on the deficit hawkish side and who is responsible for limiting it, to quote only one point: five trillion game, and he was basically for shit and then the other people who are more so it's it's a lie of dad. I, say it start like a feeling some of Dan, I mean, if you look at the economic situation, the United States, We weaken borrow more money. Interest rates are no longer on the floor.
The way they once were bit, but they are low if you were doing something worthwhile. It's ok, but there's a big question as to whether one when five trillion is so to speak to the real. number here, because a lot of the mechanics of the legislation are designed to hit that target. But the people who wrote the bill are not the people who sort of picked the one point: five trillion dollar target, you know that this is a question of waiting. A lot of debt banana, not a crazy amount, but then this question of is it really can be more debt? And some of that connects to the tax tax cliff issues. Some connects to the loophole, type stuff that that you were talking about and some of it, I think, has to do with the dynamic. Response of other actors to the review, so I wanna I want to jump in on this point. So there are two things that I think are really worth pointing out by those that we often talk about deficit in the american political conversation.
as some kind of moral ill right, debt has developed this moral language, a debt is bad right. You should feel bad if you are in debt and out altogether, right way to think about it. I think the reason, the debt that this package adds is problematic. It is twofold. One that you often hear Republicans talk about the growth, this tax plan, which will add to the american economy. If you look at how tax plans get modeled and if you look What the people, who really do this say you cannot possibly know what attacks plan will do a deficit financed one until you know how it is paid for, because how it is paid for like. Let's say you just raise a bunch of taxes later, but you added a bunch of interests on the debt. Now you have a tax spend, it will add negative. dear economy. Let's say you pay for it later by cutting really really import in investment spending right or indeed things like that. Now infrastructure now have a tax plan that will reduce growth from the economy. The tax plans
that add growth are Tenby. Revenue neutral can often be revenue positive. I was taken on the art whose at the American Enterprise Institute he's a very, very well respected right of centre tax expert and you. telling me that he had done this big project with a cloth or two thousand and nine were they. May she looked at tons of these different bills that that had passed in in different places. They ran like a big tax model and he found that, if you were deaf financing these tax cuts had no statistically significant effect on growth regret. That was that, so here he will be there to tell you and and and has told me this is a really big problem in the bill that this bill would make sense, except for right or lease of corporate side of this bill. He thinks it makes sense, except for the deficit. Fine, because a deficit financing, at least as far as until now is likely to wipe out the growth impact. So that's also by the way why the that's why wanting other that you get in here is weird republican thing where they say this bill
economic growth will help the Bell pay for itself? Which would more true. If it were not deficit financed re like it economically, does help the bill, bring in more revenues and a static analysis would show, but but the deficit financing under but the thing that I want to mention in particular within a republican context here, isn't it deficit find dancing suggested. We also don't know the true distribution of the bill, so you see Two things going on right now, like from the tax policy centre or the tax foundation or others saying. Ok, the bill will give much too that the middle class, this much tat people make indian you know than the top one percent this much to the bottom. Ten percent, all of those are based equally wrong in terms of the overall long term impact of the bill? Because We don't know how the bowl gets paid for which it eventually presumably hassebu. Morally, suddenly Republicans Democrats believe at it the house without a mainstream view in american life. eventually, you eat you paid out your debts and if you do that from spending cuts,
for instance, which will certainly be the republican idea on this. Well, if you look at what the fellow government spends on with the exception of military services, it tends to be pretty progressive. I mean the people who rely on federal spending are biased. Towards the lower and the income scale there. I've said this before and others have, but the federal government is basically a mass insurance provider with the standing army. So are you going? cutting Medicaid are going to be cutting Medicare, you gonna be cutting food stamps it. What are you cutting and mere cutting the things that civil rights budget wants you to cut? You are taking up and that is already regressive and making it much much much more aggressive cell. Problem number one. The plan adds, let's just say one point: five trillion onto dead over ten years leaves out for future. generations, to figure out how to pay for, and also because of that, thing is being said about how much growth the plan is going to add to the economy and what its distributional impact is is what we can.
like those huge question mark in those here in a country like Heaven has its right up for their comes of economic advisers about the growth benefits of a corporate taxes. He's mostly referencing studies that assume that your reply in a sort of modelling exercise. You will assume that your replacing the corporate income tax with either of value added tax and discuss previously and weeds a lump sum per capita attacks which nobody does but is convenient for monitoring purposes. or some kind of unspecified spending cuts red an end when the Bush administration Produce day internal treasury, dynamic scoring of bushes tax plans? Would they came up with was that you know these Bush tax cuts will have a large programmes. The fact if we pay for them by cutting such as pretty and Medicare. So proponents are not stand. By any of those things. But you
generate the growth that they're talking about. You half do come back around and would all these different possible papers have in common is its you make poor people pay right- and one thing I think, is interesting. Harry ghost your point, but how other countries do this, because there's a lot of pointing in other countries is a pretty interesting, very fast. Tax policy. Twitter has really become like a like a good thing, and I hope it it's pretty. It's pretty interesting. And Tyler Callin the economist, George Mason University, was on the other day- and he said well, look what's indeed they had a massive corporate tax got a couple years ago now to having another massive corporate tax gets a cruelly Vienna. Here's a country we think of his quite progressive and and has clearly decided that the cutting its corporate tax rate to well below, where is it is a good thing and then just firm and who is to be President Obama you, VE economists came back and said: yeah, that's true, but they are doing. That paying for their moving. What was
the money they are making for the corporate taxes into, what's basically their value added tax, and to do that in countries a one percent debt to GDP. replace and and and very very low standing that, so you see, and other countries is an idea that yeah corporate tax cuts can be good, but you pay for them right. You, you, you create that certainty in the UN in what's happening fiscally. We are not doing that one, we are doing, at least in the Senate. Bill is using the tax plan to get rid of the Will correct individual mandate fact which cost a ton of just completely non packs related problems wade. So you know This is an idea that initially Republicans had not wanted to broach, because its dumb, why That's not the reason why that is part of that is how I mean Paul Paul Ryan talk about desert expressing to get his members agree with his bill, which doesn't do this. He was like look we already
passed, an Obamacare Bilbil, and then it died in the Senate. So I didn't want to put that's in the bell again, because I didn't want the Senate to not pass it but like we are all for repealing the affordable care. In the house representatives so them in the Senate, Tom Cotton floated on twitter, and this got to the president's sweets and then eventually do or an hatch that the individual mandate by leader of the. U S Supreme Court is a tax rate, you normally think of taxes is raising revenue, but the impact of the individual mandate is to help induce more people to sign up for federally subsidized health insurance. So if you caught unquote cut the tax of the Obama CARE mandate, you reduce federal spending by several hundred billion dollars and you then improve you're. The math in terms of the deficit numbers right so like its attacks, God it's actually a spending.
so. It helps offset the costs of the corporate tax. This means you no fewer people, health insurance? I think that canonicals CBS number is that its thirteen million India. I do think indefensible. Opponents there is reason to believe that that is a a high and estimate, I grew, and there will be fewer people than that. The foot, I, though, is that, if not as many people lose insurance, as the city thinks decisive, isn't safe, much money as the CBS thinks so again. I mean this is this is part of the deficit question right I mean. Point five trillion it's a lot, but but I think this will add more did the deficit. That, because would definitely happens when you were peel. The mandate is that healthier and wealthier and younger people will tend to drop out of the insurance pool, and then that raised,
is premiums that are charged for everybody else, and then the question becomes how much on one sort of fork in the road. You get a lot of death. Spiralling big premiums are going up? Even more people drop out, the remaining poor gets even sicker and it goes down and down and down you go The other fork in the road is that you don't have that much that spiralling that a really large share of the people on the exchanges already are very heavily subsidized patience and that cause, they are such subsidized. They are not gonna, be that sensitive to the prom, increases that are unleashed by the sort of first wave dropouts. But if that's true right, if, instead of third, million people losing insurance. It's really only like five million people, which is still not up, then the deficit impact here is gonna. Work being a lot less than they were estimating something in the range of three hundred some billion way and self. It goes down to seventy five billion way. It is
because one reason would go. Is it's not just that five million is fewer people than thirteen million, but its biggest premiums will definitely go up a lot right answer. The question that were sort of model we are debating is: when premiums go up, awhile Are people going to decline to pay twenty percent of what that premium costs with the federal government, picking up the other eighty percent, or are they gonna still do it right? So if you have a lot of loss, Sharon's federal spending goes down a lot because that the subsidies go down a lot, but if people just sort of stick with it and rough it out And even though your covering many fewer people you're paying out way more,
Subsidies at this is similar to their the crushing reductions issue where it's like making the risk pool worse, does not save much if any money, unless you like totally gut health insurance provision, the United States. So I mean to your point just the framing like it's not here to me what is going to happen here, but it's like its problems on all sides and the problems that, like Miss, Connell, Donald Trump solution, yeah that and even putting aside how it interacts in this sort of delicate way with the rest of the tax plan debate. It's just a bad idea. It's just destabilizing insurance markets all across the country. For no good reason I mean it's not a good way to raise money. Is your pointing out? It's not a good thing to do to be affordable, correct. It is not any more publicans view that what would be a good healthcare plan is the affordable care act, but without the end of it,
mandate. I got. That is also not a proposal that Republicans believe, and I know it relates to skinny repeal. But if you remember one Republicans we're doing skinny repeal. The only way they were going to allow it to pass is if they prove ass in his hand and then the house They would not actually let it pass into law. I was just going to be a vehicle to go to conference so now they're going to do it and pass it into law and just blow up its markets and why they going to do it. It makes tax reform may be loaded easier. It's a symbolic. and ended. In reality, actual waiter attack Obamacare on the environment. It is unpopular but is going to create a huge set of new policy problems in the interim. Markets are public goods are going to correctly be blamed for and by the way they have now done. The thing they were doing it during the affordable care got them in the most rhetorical trouble, which is getting health insurance for poor people in order to finance attacks, but for which people? It is just
such a bad idea and and by the way, compared to a lot of the things about corporate corporations deciding to give factories in America because they got up slightly better tax rate or on growth. A tax, but we don't how we're gonna pay for it. This is real like we know this will happen right. This is like a sure fire one hundred percent you're going to destabilize insurance markets. So you ve got these kind of perspective long term. economic benefits may be, but maybe not versus, among other things, this extreme We bad piece of healthcare policy tucked into the bill. They also publicans, have no plan for solving, has been talk of passing the Murray Alexander Insurance market, stabilization package, that is tables, haitian baggage that is meant to be built on top of the individual mandate, as to undo destabilizing that the trumpet he's right dead and some other problems and joy to be fair. But if you take it we need to think about. This right is like, if you put twenty per
and of stabilization back into the market with private Marie Alexander, but you take out fifty and of stabilization by wiping out the individual mandate. You have ended with a net law of stability in your insurance markets, which is what we're doing one one to get a quick net of advertising revenue for the weeds. Let's a quick, quick, breaker holidays, you know it's it's a busy timey here you got presents to buy. You got stuff, you gotta mail, but you also got traveling you schedule allotted days off at the Post office, it's hard to find the time to get into the post office. To do the mailing that you need to do to a standstill. Com is a great solution, because they let you get postage on your own. Schedule, at your own desk in your own homer offsets office, they bring you all the services of a? U S postal Service office, but right to your fingertips, you can buy in print official postage for any letter any package. class of male using your own computer printer and the mailman picks it stamps are comics it easy.
The new digital scale that automatically calculates exact postage since a couple even You decide the best class mail every time you print postage any day anytime, and the blessing stamps that com is always open any time of day any day, the weak any day the year, its incredibly simple credibly can be. I? U stamps that, come whenever I need postage, because this really nothing easier than firing up your web browser Prendick get out right. Now you Who can enjoy the stamps outcome service, with a special offer them goods before we trial plus posted in digital hale with no long term commitment scottish stamps that comp click on the microphone at the top of the homepage had been weeds, stamps that calm enter weeds. Those problems are pretty bad, as your best bet like. Are there any more problem? There are more problems, and so God you ask about so in the city build one of the fund. it's about. It is that the corporate tax cuts are permanent, but the individual tax cuts are not
it on. Among other things, one of the things people talk about taxes is that you want long term permanent, so that boy individuals and corporations can make long term decisions about how to arrange their economic lives at. This does not offer that, but it also creates this just huge, gaping cliff in american tax policy, which we had before. but wasn't a good idea. I would say I find this is a particularly through the weird thing, so they had to me some calculations about like how to make this work. Craig had a work, the one point, five trillion how to work. Their profound desire for a big tax cuts for business owners had a work of biggest state tax cod, but also how to make it politically liable. because what you could have done with just said, like we're gonna, do a one point: five trillion dollar tax got for business owners and errors and good luck, but they do want to do
think they re and on cutting taxes for the middle class, even though they don't believe in that as a policy. So they had to put that in the legislation. Then they had too much tax cuts. So something had expire, so the decision that they made was that the corporate tax cuts are the unpopular part, so they should make that permanent and the middle class tax cuts are the popular part, so they should make it temporary. So now, if any back bench members get oh, oh queasy, looking at these charts, where you're like raising taxes on sixty under the population. They can say. No, no, no, don't don't don't. Don't worry about that run. Ie were clearly. Democrats also favour middle class tax cuts, which is gonna get those middle class tax cuts extended and, frankly, of Democrats come out against. Extending the middle class tax cuts will work somewhat beat them and then we'll extended, and who knows we could, maybe even you know, do even more corporate tax cuts. So
that's where the signal one side of the Caucasus, but then What they're saying you know it's just an arbitrary one, one five trillion dollar target Babar, but whether something arbitrary about the one point, five trillion dollar target, it's an arbitrary targeted. They picked themselves because some of the members of their caucus believed in it. They they thought it would be dead. Injuries, to borrow more than that so they're going round in saying to more deficit minded people No, no don't worry like this is affordable. So it's a real you? It's it's just a sort of Finally, I want to just run out alone What am I saying if they do what they're saying the other side of the Caucasus. Then what they're really saying is that the deficit financed costs of these tax cuts is much much much much long term, nor I, the higher well ain't much long term higher. They made a good writer, fully implemented. Hocker bully
because the other thing they do is they face in the corporate tax cuts. I think I'm gonna go year to delay, but fully implemented fully extended version of is way more than one point: five trillion dollar right: it's like its own over three. I think dip, depending on exactly how you look at it and in what she thinks. Gonna gonna hamlet, the inflation rate, and think you're into a terrain aware? I try to be on a relaxed side about about debts and deficits, but if you really went that far, I think the odds are good. That you would have a problem and of course another thing. They're saying to a third faction of the party is: why don't worry if this causes, like a fiscal crisis, sick seven years out, because we know right that, like deficit, hot community in Washington is full of morons, and so, whenever Democrats are in office, they insist that there should be balanced deficit reduction, that involve spending cuts and tax increases them.
Republicans in Washington, we just cut taxes. So dont worry right like it's good. If there's a debt crisis during Elizabeth warns, administration, because that's gonna mean she's. Gonna have to cut social security, benefits are, or something like that and All of these lines, like don't worry about the middle class yeah sort of makes sense, but like they can all be right. You know They just they decided that they want this corporate tax cod and then, depending on what your concern is about the bell. Leadership will paint some different picture for you about how the future will rise and it just like it.
there is a serious problem right, like the Congress of the year, twenty twenty five will be consumed with how to address the looming giant tax increase on the middle class, and it's going to be hard to know exactly what they can do about it. I think I think people who are expressing like analytic certainty about what it is that will occur in twenty twenty five pulling themselves like something will happen and there's no guarantee and by the way, putting even aside what we did to fix that Imagine that in twenty twenty five or twenty twenty six or twenty twenty three or whatever it might be, we just have a big recession right, because a big recession when there is a recession. What you need, ideally, is fiscal fire power to fight. It not just like in a conceptual whether you really do need that eighty percent of the, if you're, in no space, where the we are a little bit higher than they are now What you want is to be able to
have enough money in the bank that you're not creating a massive debt problem by whatever giving a stimulative tax got at that point, or you know making medicate bigger food stamps or whatever it is it. You need to do and discipline in a very bad position, weep already this play out, we saw this plant during the two thousand and nine recession, and now we're getting right back into it. Ran appeared of economic growth is not what you want to do. Massive deficit spending is actually when you want to make sure that endeavours picture a little bit better ass. You have fire power if you need it down the road, so it isn't just that this will create political problems. The road. It could very well create very serious economic problems and the road that will make the next recession I did get worse we get. Things will make things worse number for this. The bill creates at least two or three of the biggest crazies loop, as you can possibly magic Danish of Euro, whose attacks expert calls it the tax we're trudge active twenty eighteen because it will allow for so much, z tax arbitrage in it the bit.
and here it is, is pass through, which are I've been took her water bobbing tax experts, wondering I will tell you, is zero of them will defend this provision like no republic intact, experts. I'm aware of will explain that did the pass through thing is a good idea to you give a quick overview over the past year problem. So I mean it's hardly even know how this got into the political system as as a problem exactly but the way taxes work in America is. If you have a company, it might pay corporate income tax, but if you don't to pay corporate income tax, and your company doesn't have a lot of owners. You can just not pay corporate income tax, so law firm- generally. Don't it's true that small businesses don't but the Trump organization doesn't. I believe that coke industries doesn't
the way this works, is you just say, look we're gonna, take the owners of the business and we're just gonna divide up the business's profits and we're going to count that as income for each of the business owners. So the income says we passes through the sort of veil of the corporate entity and is taxed at the individual level. To that as it exists, is a tax benefit right, like you pay less in taxes, if you own a business and our taxes a pass through entity, then you would. If the business paid corporate income tax then kicked money out to you in the form of dividends, and then you pay taxes as an individual right. So like passes it just, it exists as a tax benefit. I would
the economic modeling justification for that is non existent. The reason that we do it is that it would be very cumbersome. It will be annoying for a genuine mom and pop business to have to file corporate level taxation and then, as an abusive, add on I ain't multi million how her businesses are lodged, structure themselves as if it's like, MRS Kim's, dry cleaning, chopped down the road and eat just like it's a loophole that should not exist in my opinion, but I am, I think, legitimately, like just big. This is were what would you have Democrats? I spoke tat I would say is that, like you know, four just large past the refugees, you shouldn't be allowed to be a pass through energy use ago, though, the like small business lobby got their clause into republican members of Congress and they got them saying that it would be unfair to do a corporate tax cut that wasn't paired with some kind of relief
for wealthy owners of pass through entities. I dont understand what would be unfair about that right like they Their individual tax cuts on this anyway way, but I mean the is it right now they are taxed more likely than other people and that if you have reduced the extent too, they are taxed more likely. That would be unfair to them. I dont know what would be unfair about it, but this idea we kicked around the congressional Republicans for years. Then presidential nominee became Donald Trump, a man who, just personally opens large. Very lucrative pass through entity is so like random concern bubbled up to like the top of the policy agenda, because Donald Trump would really like Donald Trump taxes to be cut and there's no there's no reason for the sake, one searches in vain through the
tax policy, literature for any reason to say that it's important to give an extra tax benefit based on business and good, and you can tell what there's no justification, because they keep calling itself businesses, but the size of the business is not relevant, but the well that's true for a lot of things in this bill, but but the thing that this done is. It creates a huge, huge, huge, huge, huge, unbelievably huge incentive destruction, health, not as a corporate entity, but it's a password right end. So Republicans I put a guard rails and things I got to say: oh no. They thereby they put again little provisions thus be like if you supposed to uses you shouldn't use it yeah, but Rob I think, as a general point, you not a lot of confidence in the Internal Revenue service. It I'll think that they want a lot of iris Asians up in your business. You don't think iris agents are good at being up your business, but for this and do not become a multi trillion dollar loophole, who hit deed
the IRA, to be like unbelievably effective at in almost metaphysical form of tax enforcement. Were they decide like? Are you a proper ass through? Are you not? Unlike? What are you doing, and you know? Is Europe? Is this Miss you provide. personally labour, or is it like somebody's paying you for your capital? It gets very, very you're very quickly? But the point is it? Is it open up even more than we have now me somewhat of this now, a gigantic fucking tax loopholes like something that it is a full employment packs account now? So I don't want to have this off and because we have always of no. No, I mean the thing about it that the tax enforcement, because Republicans have really worked over the decades. you- can imagine a universal, a political party that was
animated by strong belief in optimal taxation theory and the evils of high marginal tax rates waited a party that the genuinely believe that would be monstrous about tax enforcement right because the more rigorously you in force the tax code, the lower you can make the marginal wrecked sweat like loopholes and evasion and abuse. Don't don't act on the margin of the Republican Party has very forcefully acted in the opposite way. Right like the hardest thing to get them to agree to in any kind of budget. Negotiation is to fund IRS agents to conduct audits of wealthy. people to get like lawyers and and things like that, and that's how, over the years, both like things, I'd be, the sort of infamous carried interest loophole came into place because we're opponents are not into tax enforcement.
But ass. You probably heard last year right alot of stories about the Trump found Asian and these seemingly illegal shenanigans. Then it got up to an The reason Trump got caught in those shenanigans is that he ran from president. So a bunch of joy listen and ultimately didn't fair and hold it the wash imposed like bird dog on various aspects of trumps life? But, hadn't run for president. He could have kept getting away with abuse of non profit law hung indefinitely, because the Irish has not been provided with the like army of investigators and attorneys Republicans they the they love law enforcement. They love border security and like they don't like tax enforcement. But make their fury of how taxes should work. Do you really need to enforce tax are rigorously, and with this they are prying. Another big issue open where
if we pretend to be naive about wigand aha they're gonna, make these guard whales work, but tat enforcement is a lax in the United States because the Republican Party wants to be lacks. The reality is that is such that these things won't be enforced strictly. They will be enforced as poorly as you can. Possibly imagine read like there's. Ten million are more of them by the way that this summit is one say, your cause, the passer one is getting a lot of play, but does other one that isn't even something the Irish should be enforcing against its just like up a crazy finger doing so the republican tax when us for full expensive for for businesses. So you your business, you buy whatever computer and you can fully expense the cost of a computer, save your pain, really no taxes and that computer, but it all oh keeps the deductibility of interest so now you get into a situation where you borrow money to buy a computer and you expensive computer. You are now paying a negative tax rate, thing you just bought the governor
actually subsidizing capital investments right which just Nobody thinks is a good idea were also to be clear. I mean it that's scenario. You know capital investments are now. You know, I mean it's, it's it's it's a great tax policy up and if you look at them who really uses la of debt, finance red light, not necessarily companies that are investing in tangible physical capital, it's often thanks White will borrow money in order to make purely financial. Please you know they will buy up. A tranche of bonds are based on bonds that they themselves issued right. Of course, private equity come is. This is like the essence of how you go. You see a restaurant chain right that owns only brand equity but owns land in buildings and stuff. The design- and you say: ok, it would be more profitable to
who tons and tons of junk bonds by this company and have it be highly leverage entity right rather than a company that has a latin big net asset position in owning restaurants. It would be deeply deeply deeply debt and would have this ongoing stream of cash, because you could deduct the interest rate. It would be highly favourable from attacks dynamic for sort of every. going business entity in America to be carrying as much debt as possible, which creates enormous amounts of economic fragility. In the case of a recession right because you
go from a situation where your, unless average restaurant chain might lose money in an economic downturn, might have to lay off some people and then would just kind of bounce back the next year. But your highly leverage one, whether collecting this tax benefit during the good years in a bag year, the document will pay their bills, they're gonna go bankrupt. The whole thing may catastrophically fail of words when Ex catastrophically fail in this way. We have you no cascading waves of failure, so you your building, potentially much much more fragile macro economy really for notaries. Finally, we just got an inequality problem in this country, we have an economy where a tremendous amount of the gains of growth now go to the top one percent- and this is some saying that that sometimes you even here Republicans lament
if you listen to a lot of the ways in which people justified like? Why was it that the White Working class would vote so heavily for Donald Trump if they decided couldn't have anything to do with racial and cultural resentment. It often came down It sounded a lot like in a quality, They know what is it like? Rich people in these cities are getting all the gains while bear. You know don't have jaw so are getting. I profited by Opie, oils and and and and its true right. We do have terrible economic inequality. we do have a lot of social stratification coming in part from that inequality. Social mobility is in part a function of inequality, if you have very large spaces between the wrongs of the latter is harder to climb up the ladder and this bill makes a lot or so we got some new tax policy centre numbers, and this is in the bill seriously. On its own terms, looking assuming that the things that are set to x, expire in and things? Don't? Don't Eddie, you can debate, since in the spell in the stuff. But I think this is pretty good median set of estimates, and so they,
the by twenty twenty seven. The top point one percent will have an after tax change: of two hundred and eight thousand dollars they will be paid. They will get two hundred and eight thousand more dollars after taxes to one percent, thirty, two thousand, the middle Quintal fifty dollars and the lowest quintet will be paying ten dollars more and then, if you like, go lower and look like how what percentage of households are helped not helped most households beneath the top ten percent are gonna end up paying hired if you like, the Middle quintal right the thing we would think of most clearly
as a middle class. Sixty five point: six percent of tax unit end up with a tax increase in twenty twenty seven. Meanwhile, at the top one percent, its sixteen point, eight percent of tax units and at the top point one percent is only one point: eight percent of tax unit, so you're you're, looking at a tax bill here that is going to take the inequality problem. We have in the country currently and super charge. It way, and- and here I mean I think just because this promise is so blatant, but I think it it sums up the whole question of you know: big changes have down they have trade offs, that they raise problems and the question is is like: why do you under go all these problems weight and that the overriding message of of all of these things is is a belief not just a belief that there, some benefit to a lower corporate tax rate. Is you see ready, I see, a lot of people are right or centre commentators trying to be kind alike. as smarter, smarter than the game and being like you know?
Browser may be downplaying some of the virtues of this, but to undertake a piece of legislation that is soups problematic. As this indicates that you believe you are solving an emergency room like the reason Democrats put the affordable care act through. Is this really bad that many Americans are uninsured, right and and the impetus behind like Medicare for all? Is that again a belief that, like there is a crisis in America, and so it requires a drastic solution that creates a lot of problems Is it solving a big problem? The proposition here is that there is a enormous crisis right leg at one of the top one. Two three biggest problems in America is that being the shareholder in a profitable american corporation is not certain
lucrative enough right, I mean I mean they that pursues like it might be like a little bit better, but that, like this, would enough fundamental way. You could go home your career in politics and say you know what we lost some, but damn it like. We brought this how we really we really tackled the problem that, like wealthy shareholders, were not earning a sufficient return, and I just don't see any justification for that, because we have had a generation long Greece in inequality at as we ve been seeing way. There's no there's no like hair on fire like nobody's, making any money here and it's mine You can even sound like a crazy thing, but it's legitimately true that if you were looking at one thousand nine hundred and seventy nine that taking inflation into account, there have been like no gain in owning the stock market. Four hundred and fifteen
spread, and you could say you know well look who's, gonna cry for these rich shareholders. But the fact is that, like, if you can't make money investing in stuff like you're gonna, have a problem as a society and as an economy, but people have been making money investing in stuff like it's us. It is not true that, like there's, been no no profitability and like founding a successful coming, right yeah. I won odd thing about the spills. How easy it would be to write a better one big. It would not be heart. What you do is you would take the corporate tax out of this bill, you leave it more or less as is, but you make her a twenty five percent. Twenty five and is rightly national business round table asked for facts of the business lobby. When they came to Washington and they really Here is what we want from you here is our like. Our are open bid face at twenty five percent, not twenty. What is what's in there,
now, Mitt Romney said: twenty five percent are twenty, it just Donald Trump, randomly said twenty on the campaign to us in our twenty, but that there is no reason for this cause of much more suited. Eighty five percent, which would still be a very big corporate tax cut from thirty five. It would put you know in the sort of way thanks of other developed countries who it would more or less solved the problem. We have a waiver of excess business tax rate compared to our competitors. She do that you do not have the individual tax out of us at all in the weights constructed. You would not have the crazy pass for thing at all, What you would have is a big increase, We found a building for the child tax credit, maybe you'd have an increase and doubling of the earned income tax credit like possibly child ass adults, which is something that even Paul Ryan, is any support. So now you have a bill that is doing. what you do on the corporate side, but also doing a lot more for the poorest and in America, and then you pay for it by
from the base broadening, even maybe some of the same based broadening they have in the bill now, if they want to screw over state and local deductions and do you know mortgage interest, duchess, rich people? I honestly bother me all that much and you'd get growth that are out of that bill and you'd be solving a more clear problem, but also I think this is important by taking the bay oh and taking the gains of the corporate income tax growth that you're trying to get and following it into a more progressive income tax code, you would also be making tree distribute gains are getting from this growth, because this is one of the things you could actually imagine a world where a bill like this court unquote works, but way it works. Is by giving rich shareholders a bunch of money back and if we see nothing else in the past couple years, it is it the mechanism by which that our economy shares the gains of economic growth are very broken. We have very high corporeal It's a very low labour share. Those corporate profits. We have not seen the kind of way
gains. We would expect her would have seen in another era from the kind of growth we we have right now You could do better. You could have something that is both pro growth and pro more progressive distribution. If you wanted to its, not math radically hard is not technically heart, in fact, to be a lot less technically complex building, when they have now, but you haven't done it because, as far as you know, one problem solving is it: they believe the rich don't have enough money, and sport is to progressive and so they're they're doing something to fix that. I make no mean. I also think that some level it speaks to a lack of confidence right that You. You mentioned that the swedish case, which is interesting as an interesting political factor in the previous cabinet, a centre right cabinet. They enacted a small Asher. I mean a meaningful, but at a smaller reduction in their corporate tax rate that was paid for
They did a few years ago, and the consensus in swedish circles is that it worked well Now the new government that's in place at the centre left government is doing it again right. It's like up successes, breeding success, kind of thing. I am super sceptical. I think that leg I dont think Ankara, which outrage would help anything at all. I think that's probably just wrong, but I will acknowledge, as a journalist that there's like a lot of good this economic models, go to convert soup. We think that I'm wrong, but if you believed in these optimistic dynamic effects right like do the twenty five do, the twenty eight that Obama proposed right. then, like showed that I'm the asshole great like biogas The economy takes off and has as wages, right and something like that, and particularly because if the dynamic affects did kick in right, the fiscal situation would come in way. Better expected and then it would be way easier to cut taxes right in
in the nineties, when growth turned out I ain't you don't even have to have a causal attribution. It is true that when growth turned out to be faster than people had expected, the budget situation turned out to be better than expected, and that meant the bill. Clinton and the Republican Congress could come together and agreeable, cut taxes more and also spend more money than they had been anticipating. So people like you personally, are to stay strong believer that a corporate income tax cuts will set off a boom like you should be willing to settle for ass in order to make sure you get it done, because then it's gonna get done and then you couldn't, you could put more taxes an end to whatever, but I don't I really think they believe it or even understand what these these models or even saying, is going on, and I think that, like the inclusion of the pass through stuff, is a real give away in that regard, that is just a
It is a kind of looting, that's happening, you know like they don't care of this policy is sustainable or if it work sorry if it has downsides, or you know that President Bernie Sanders is going to now like pay for Medicare for all by repealing the Trump tax cuts they just like going to kind of crack open the piggy bank people going to grab as much money as they can and what happens later like they and with that, let's just say that we care about you the listener and we care we get as many listeners as possible. Asked Hopefully, you are recommending this show to other people. You are spreading the word spreading. The word love hopeful, your checking out of Facebook Group, that's the place where you can ask questions for you and I episode check out box tat, calm, slash the weeds if we, it and in more weeds in your email inbox adds amazing stuff. If not, I don't know
you keep lessening outward me, wouldn't be back with. What's probably can be more tax talk, although you no news news may intervene soap. So thanks everybody out, far from listening. Thanks to Peter Leonard are engineer, and I will see you Fran
Transcript generated on 2021-09-12.