« The Weeds

The tax bill's winners and many, many losers

2017-11-03

Dylan Scott and Dylan Matthews join Matt to talk about House Republicans’ tax plan.

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This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
Tax reform. Without this having dominate looking through have ever so the reason I'm about to Media Potass network another place his enemy. Today I have two guys names dealing with that Abdullah Matthews, who is visiting us from the New York Office and don't Scott. It's a Lotta Dylan's. You know a little less less diversity were all wearing glasses, but is it is a great crew to talk about the tax reform bill that was unveiled to? much fanfare yesterday by House Republicans after a lot of anticipation and There were some. There was a letter
leaks and there have been a lot of discussion about. This was not exactly like the tightly held secret that the Healthcare Bell was, but I was still kind of surprise what came out it was in it a track. The broad themes of the framework buddy, It was not exactly what what I expected an and done at men. These you you're good piece up today about it. It's sort of surprisingly bad re, so is a front like I'm, not the target audience for republican tax bill. I don't think it's that important to cut marginal rates on rich people or give tax relief to corporations, but there are coming though I still so excited about in the overall framework and the main thing was there is really a possibility of them, not just expanding the child tax credit, but making it more accessible to poor families. The way that that the credit set up now they're sort of a sort of complicated formula to decide if you get some of it
If you don't have an income tax liability like most poor families, don't and Marguerite beyond my glee and importantly of uncle Trump train really hard to expand that in and allow more poor families to claim more of credit that did not make into the final bill. What did make it in is this provision requiring social security numbers for people claim the child tax credit, which is a thing, sounds reasonable until you remember that there are and documented immigrants who live here who have kids Who are you a citizens and want to claim this? on behalf of their kids, where citizens are entitled to this credit, and they can't do that because they don't have. As our security This is something don't kick about. Three million kids off of offer the system basically to stick to immigrants doesn't raise a lot of money and also not doing the thing tat to help poor families, so that was just a huge with it was appointed. The of could have.
been a legitimate sort of by partisan thing to cut child poverty and they just like didn't bother to do it, but I mean you know you save a dozen raised that much money to too narrow down that way, but it does that. operating at a margin. Writing in the ten year scoring window, they have budget resolution that calls for one point: five trillion dollars. In addition, all deficits over ten years and the bill hits that mark as an only hits it yeah. They don't seem to have left themselves any room for error in terms of hitting that. One point: five trillion dollar deficit increased number ride so in and that's that important. That's not just like up like a theoretical goal: ride like like an actual kit, can you explain to people like like this? This? really matters like they can't just make Dylan happier by making the child tax credit refundable bright
so this is all back in the Senate. It's like its health care. All over again, the centre Republicans are using what's called budget reconciliation to pass. The tax bill with only fifty one instead of the usual sixty that it takes to move legislation, and so with that special privileges of budget reconciliation. There are certain conditions that the bill will have to me on the Senate side and one of those is all those have been laid out in the budget resolution that Congress has already passed and the it's kind of an arbitrary goal, but the Senate had to set some kind of deficit increase number that they would have to me, and they pick the one point: five trillion dollar number, and so now that's going to frame everything that, in the tax bill from here on because otherwise you would have need sixty votes and therefore democratic by an end is important, as is this a lot of this, a big ran into it touches on a lot of little things right,
Some of it sounds like kind of crazy way, but so, like one, provision of the bell would take away a tax credits that currently goes to families who adopt children. So that's like erases, like almost no money to do, that it's like a freebie for anybody who, like throwing on their add like so and so even voted to raise taxes on orphans, unlike so into the she really did like. That is a real bona fide legitimate provision of this legislation, and you can't just strike that right. You can't decide ok this or that random small thing has become like a democratic focal point there like operating with zero margin for error, but let's was put back the. I think you can I'd, like the commissioner responsible for our budget put out just like a table trying to summarize the bill which, having was helpful to me too, like
we get out into a few different buckets, and so one big bucket here is the estate tax write, which you get him big cut right away growing, to eventually at total elimination and that costs about a hundred seventy billion. I think it is and here is about ten percent of the overall cut right of the of the net cut, so that just like a big thing, that's in there is like an ideological, fixed point you have about a trillion dollars worth of corporate tax cuts on net but gross change on corporate is is way bigger than that right at sideways. It's like a thief, He trillion dollar corporate tax cat offset by two trillion. Absurd business, this? Yes? So there's you have to
differentiate. We have two systems for taxing corporations in the US, there's one where you pay these like actual corporate income tax, which is currently thirty five percent, and they want to cut to twenty percent and then there's another system for us or smaller companies organized as partnerships, LLC use that kind of thing and they pay for normal income tax rates. After all, the profits are distributed to owners and they were both of these groups. The tax plan, I remember it's cutting them in a lotta, weird ways and as you see, there is a huge gross tax cut and then there a sizeable term revenue. Razors trying to expand the base for corporate tax in, and Cohen, more revenue sources. The net effect of that is a tax cut, but there, is that when really big on their companies that lose significantly as a result of that I think, is important to understand the sick. an interesting mash up of like two different legislative concepts, rather,
We have in the fury of washing and politics like a notion of tax reform and reform means you cut rates and you broaden the base and its. People will say things like out like a like a smart take column would be like tax reform is really hard and tax reform is really hard, because, when you broaden the base by eliminating these breaks, you have some industry whose like no but I like my tax break great an end, so they try to stop you and because it's hard, the way, get it done. Is you make it by partisan rights? You have a lot of. a lot of different senators might vote for your tax reform bill right and you try to get my comments to say. No, it's good, it's good! It's good that they're doing this hard Then the other ideas like tax cuts right and that is like you say
Ok, you don't need to pay much shackled anymore and then Democrats get mad because is regressive and they don't like budget deficits. What whatever but but tax cuts, are easy I'm on the business side. This is really like, like its both at once right. It's it's hard like tax reform, because people are losing certain tax breaks if they want to fight for button democratic and vote for it, because it's a giant business tax rate and nothing there to serve impulses behind this one is just like business. Lobbyists want lower taxes on business and they are not interested in any of the pay for as unlike no one can be point in that direction. In fact, their actively can be fighting against some of the pay forest and then there's four of, like principled and, like. I think taken in certain respects, but like like a real argument that conservative economist make that the corporate income tax structure badly and should be structurally changed in some ways so like now, you can deduct interest on on debt a lot of a kind
Don't think you should be able to do that. Getting rid of that raises a lot of money and they both raise money and also dislike. Think that's a good idea and so you the third intellectual base of the Republican Party. If it's trying to craft a bill to solve these problems that they have identified in the tax code then for the muscle behind them. Are these corporations who have no interest in those technical changes? So well? What is it? What is the biggest like business side revenue razors in here? so they get rid of a bunch of sir specific credit. So there's a credit for domestic manufacturing that they get rid of those things can be a big deal for firms or people in manufacturing, heavy districts. They limit deductibility of interest, which raises a lot of money. I need them Interesting wine is, it's all sent him to scramble at some of the revenue losers that they have in here that a major player for politicians for years has been to shift the. U S, corporate income tax
and what's known as a world wide tax. Where income, wherever it Ireland is taxed to being a territorial tax, were only U S basing come, is taxed their various arguments. Why should do this? The obvious problem with this is that it gives you a huge incentive to relocate income overseas. So if the, U S, has a higher corporate income tax rates and like Ireland, which it does and always well since Ireland is, I think, like eight point, five percent or ten percent or something like that flow. It, quite low entirely, if we're just not taxing income, that comes there like everyone has arisen. of their income to Ireland, and so they have to come up with hacks to keep them from doing this. So they just have a bunch of random taxes. Up companies trying to move money overseas so like they have a ten percent like minimum tax on on foreign profits for company, if they're above a certain amount and they suspect your hoarding profits overseas. Does this new twin
percent tax for all money. You take from the U S and put overseas resolve any this. This tax economists to who runs this publication contacts, notes that all tax for nerds should we, he just mean the point that, like for many multinationals, this amounts to a tax increase way in No I've seen some agitating here in the last couple days on the right from groups like freedom partners, and this is the thing that their upset about re because they ve they successfully killed the border adjustment tax back when Paul Ryan was trying to make that happen six months ago, but now I know I've seen some releases from those groups that they seek they. They can see this as a backdoor bat, basically end in a politically speaking the way this building It is as if you only upset the moderates, the house and you keep the Freedom caucus on board, and so it seems like anything that risks upsetting. That ballots is potential,
problematic, but I dont know if there are even right on the merits and cabaret problems like. I think there are significant differences between what specifically the bill is trying to do is substantively now verses what it was trying to do when it would tax exports back last year and next import or tax imports. Excuse me back in the the halcyon days of of the destination. Cash for tax base I think there is a similar political dynamic where multinationals had thought they were coming in four windfall and now our hearing that they might get screwed because they were so dust to avoid this problem that their proposal ITALY causes that they serve backtracked a little too much for for multinationals, comfort. I think what those but free hawk does with that is, is an interesting question. In that sense, I get from comments by people in Group is that there are less motivate ed. by serve. The interests of the big
nationals and more about trying to get cuts for these path through entities that that don't pay the corporate income tax ends there's this. This big provision in the bill there would cap pass through taxes at twenty five percent currently, you pay up to the top rate. So if I like a millionaire, and I have a pastor cubby. Its am a company. I dont want to save rail companies, it's called the Trump organization, and so I get I get millions of dollars in incomes from it. Ass your companies, I pay the top three nine point, six percent rate and and that's that this we'd like lower that too. five percent, while keeping the thirty nine point. Six percent operate for everybody else, so this This helps a lot of firms opposition, who, I think, are close to a lot of people on this Caucasus that are very interested in doing this,
but it has a similar problem to the foreign taxation thing where it creates an obvious loophole that they then have to scramble to close in the way that their scrambling to close it might turn alienate those people. So, like the obvious problem is, I can start the dough and Matthews. duration, and instead of working for vocs media for wage, I can contract to to get business income and then count that as as my earnings and pay, this new lower rate, specific thing. They're saying right is that under this new system, if your business is a professional services business, you don't get to take this I shall new low passed away. One thing can notice that there was initially the claim that you again maybe do your taxes at postcard, which, if you start thinking about this, is very great if you will not an imperialist podcast so far, it is obvious you can't do this on.
Ass. It was the one thing they pray. Do is too like explicitly say if you're, a law firm or an accounting for him. You can't do this, the thing they say is if you work accompanying you're, not just to pass the investor than they're going to assume that seventy percent of what you earn as wages and tax it normally and then the other thirty percent will be served this business, they come tax a new low rate. Still get an advantage bets lowered, but there are tons ways around as armed inch of Euro he's really smart tax lawyer ad and why you law school. I has again Well today, were you just do do trades. So if I have a company- and that has a company I could just sell all my shares and my company to Matt and market, so all the shares in his company to me, and so were now both passive investors, and so we get the full benefit of of this tax breaks even though the lawyers and accountants who would set this shall game up, would not get the new tax break. They would at least get get new business
that guy who yeah there's there's a lot of new, exciting tax evasion, business forever tat saw her his and so all these problems and then they're trying to scramble it with all these rules, like no tax law from scanty no we're gonna do the serb seventy thirty split and that all wines up raising revenue in some weird and concentrate ways that wines of alienating the group that you're trying to help in the first place and so I imagine that law, firms and accounting firms are clearly mark meadows and being likely what the hell man in and so there's gonna be back pressure to try to do less to close those Lou pause, it's a mess, so it I'm gonna, I'm gonna, take a break and and returned it to sling. I don't got said earlier has said podcast listeners out. You that's probably know all that left that lifted Many that knows that their drivers keeps the moving. So you do everything, Can't make sure their drivers are happy every trapped in its really simple happy drivers equals happy past,
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I wonder when we saw with that with Healthcare Bell went through the house was that it rolled out, and there was my kingly lit all industry support for it in and well knit making strikingly little difference That was something that was fascinating to me. In the end, the bill didn't pass the Senate, but I would have said you can't passive bill through any House of Congress with all of the trade groups in opposition to that right. That's just like this. I how America works, so that's now giving me some questions about. You know like how we should even think about about tax bell, but am always you're a unit. You know lobbyists you now you can allow the goat. What was your expensive it like how how come they didn't matter and healthcare while I think
in healthcare. It didn't matter so much because there is a sort of ay. I mean it was really like an ideological crusade right, like we have promised for seven years to repeal the affordable care act at now. We have to do it, and so I think there was just that kind of motivation to that. We have to get this done. It doesn't matter what outside groups say what it think I'll be interesting. This time round is so terrible. it didn't matter. But you know, republic, we're at odds with doctors and hospitals and like these very kind of sympathetic groups, the white coats who didn't like their health care bill- and I do think that price. the provided more of a head wind then like if the pharmaceutical companies had been opposed to the healthcare bill, and I think it this time it will be interesting because it you know the most prominent enter group that I'm aware of that really opposed to this right now is that basically, the home builder businesses and like a real estate industry, and like that is just inherently a much less sympathetic, it's easier to sort of characterized as a special interests, and there was a recent tweet from our present
that I thought was really interesting about how you know we released this great tax bill. The special interests are gonna. Try to you now Congress and get them to stop and get them to stop from passing this bill, but republicans- are going to hold strong. I feel like I never heard that from him during the health care debate, and maybe it's because doctors and Spills are hearted demagogue, then that the real estate industry or lawyers but I feel I wonder if that'll that seems like a very different dynamic this time and that, like you, can almost a benefit, The plan is gonna, be who opposes it in a way that was not true and healthcare On the other hand, I always felt like industry in to the healthcare, but with a little bit half hearted. Yet in a way that re not be true here and also want in any illogical level a mean we're public. I don't want it,
character them too lightly, but Republicans don't like taxes. They are here not here to raise taxes on people, and one thing they came out with yesterday's Bell was a heavy heavy. Does a spin from Poland in an and Kevin Brady and there like a typical families. Taxes are gonna, go down whatever eleven thousand dollars and I think that common Brady understands perfectly well the extent to which that is true in the extent which that is not true, but I think some of the back bench members may like actually not know what is going on here, Just it is the case that, with these many trillions of dollars worth of gross changes leading to a net cut of one point, five trillion, like lots of people and businesses will in fact be pain more taxes under this plan, because there's no way around that and win
Individual company is have their accounting departments look some, as some of them are going to reach the conclusion that this raising taxes on them, they're gonna phone up their members of Congress, and I'm just I'm genuinely, not certain. How many were Bookends are gonna, cost I are going to be like now, fuck you, you gotta, go pay more link. Then this is sound like something Republicans the one thing to do. The one thing I learned from reading a book about the nineteen eighty six tax reform agenda. Should I don't plan was that you know it. There seem to be a varied identifiable. Pattern of the bill. Comes out. People mostly say nice. Things about it and then they understand what it actually does and then the plan ends up thinking and I wonder if we're gonna go through a symbol sort of adoration here, and we
sort of a number of cycles of that like having one thing, though, is surprising when this bill came out yesterday was with all the stuff. There was rumored to be in there that wasn't so like there's a big fluted idea, to limit certain for a one k contributions the week before and everyone bat shit Everyone like in the press in serve in upper middle class Sabra class. Erika in general, loves, therefore one Kazan doesn't want these limited at all, and so they serve floated that trial blown it got shot down in their no changes to retirement savings. In this bell and then they they put up. a balloon for limiting the state local tax deduction. It's basically succeeded, but they had the parrot back a little bit and then the literally the day, for this bill came out there. All these reports that the corporate tax cuts, we're gonna, be temporary brain that, if, because the reasons, but, let's put it, put a pen in the temporary corporate tax cuts because we talk about that later. When we talk about the Senate
sure there was also the individual mandate written president Trump very much ones too now repeal the individual mandate is tat. Part of the tax bill, which leads the mats favorite dynamic, of cutting taxes wretched wealthy by working Healthcare away from people, but still We want suddenly the same local tax breaks since, like well is issued This is the main reason map is a lot of steam local tax, mostly just local taxes, since it doesnt women's day work. this is an important change, because this is the interesting moment for the Republican Party, where they are attempting to make tax policy visa cultural war. politics and they have decided that what they would like to do is put a broad tax increase on. I flew but not necessarily hyper rich people. On the theory, the people they are raising taxes on live in California right
and so this is. Is it right now you take your your state, local taxes, property taxes in income taxes primarily, and you did up them from your income like all tax deductions. This is regressive, primarily because the marginal rates go up. The more your income is so any kind of deduction is worth more to a rich person thing to a middle class person. Blue states tend to also a progressive income taxes and obviously rich people have more expensive houses. So? This is definitely a like distributional progressive change, although its now you know rolled into a plan with the state tax cuts it and what, if whatever, but could imagine a democratic administration trying to do this? Would we Does that like wide? Is our public administration want to raise taxes on upper middle class people
and the reason is that they ve decided that the people who pay this tax increase. Basically, like are liberals, re big want to like underline this point you technically can deduct. Either state income or sales taxes, but deducting sales taxes is pretty rare and so this is mainly something that benefits people and states with really high income taxes, which is Org in New York, California, New Jersey and and yeah there's a degree of sticking to too liberal state governments, but as you written Matt like if you look at whose vulnerable among House Republic means they're all these. Moderate dish, republican member. Congress who represent wealthy suburbs in liberal states, for their like four of these guys, in New Jersey in various places? Ah, Tommy
Arthur, who has us or Central Jersey District, has been a very vocal defender of this deduction on this lot. People like me, Juster and another observe suburban counties of of New York, and so in a sense your sticking to the webs. Another deeper sense: you're sticking it to the most vulnerable members of your own party. If you need, if your majority is going to stick together- and I think it's, but I do think it is the same calculation they made with the health care bill, the healthcare bill was in trouble when the Freedom caucus and the moderates were opposed to it, that's when it died in March and what they up doing was just moving the building right. Winning the Freedom caucus, and then they made the book at the back are the calculation that enough moderates are swishes, that they can find their of two hundred and eighteen votes, and it seems like that's probably what they're gonna do here: yeah, I mean that is definitely the whole Brady mean that their view is that institution. I'm frightened by this. If use it, instead
who should only moderate Republicans, do not have the ability to like take a stand right right did like that. The thing about the Freedom caucus is that it has like a donor base and an organizational base that is different from party leaderships base, so they can get on the outside with Paul Ryan. might live to fight another day, whereas, like Mimi Rogers, these people, like the have donors and they have activists and they have support, but it just the same people as the ones who back Paul, Ryan and and Kevin Brady and others, on the other hand like if
looking at you know, if you are representing southern California district, your whole state republican Party has been like blown away in the post Trump nuclear Holocaust, but you still out there. If you can't tell your constituents that you're the hair to protect them from tax increases The Republican, like, I just don't, know, look what do you say Ray? What is TAT Macarthur doing in Congress of use in his stop New Jersey, taxpayers from paying higher taxes an interesting task as our. I think there are technically enough California, There is the New York Republicans that they could stop this bill onto they theoretically have the lead Ridge Macarthur, said he has serve a carcass of twenty two defenders of the state in local tax deduction was blue. Stick together. It's like guys from Long Island and in Jersey mostly be add, like twenty two people,
with the margins they haven't a house and especially given the freedom. Carcasses. Apprehensions like that's power, yeah and Arthur, is interesting, because I think I saw his ass. Great now is like just increase the deductions for property taxes a little bit more and then I'll, be ok with, and so is a guy on. Healthcare is invalid, gonna frame, how I view every kind of legislative fight going forward, but it in, being only a relatively small and kind of just symbolic give away. They got moderates on board last time, and I wonder if this is being set up. It is interesting. So, as the purse in this room who lives in New Jersey. I have not,
turn lized. How literally the only thing people in that state care about our how high the property taxes are. It is the only thing they talk about. It is like the defining issue in the gubernatorial raised this year, and so I, like I serve understand where Macarthur is, is coming from of like if you're in the state that has the top by far the highest property taxes of any state in the union. Like this of a defining crusade for you, but it does seem like Benito find money somewhere same local tax deduction is a huge problem
money they rolled out most other parts of money, they're doing the surf small thing with the more interested action, but they're, not touching charity for not touching capital gains for not touching like the places you go to make money so that they can meet yet the reason I think this solved idea may not stick when the going gets. Tough is that I feel personally that, like my tax situation, this is very bad for me and I felt it. My tax situation is really similar to the text nations of like most of the senior staff uncouple hill rate and they win. This hurly burly starts going right. Atomic Arthur's in a meeting in his eye command eyes that, like like the literally the people who are doing this work are gonna. Start to feel a little bit queasy about this living in DC or you're living in Virginia. You know your tongue amended come tax day, you're talkin bout of expensive property, tight state?
They are already doing this mortgage deduction limitation. That's like MAC great for people on homes and expensive, where I think a little bit of an overstated issue, but it's it's out there and then it's like you had an outlet, Is this really what people are gonna want? I want to get it out over I'm a little sceptical, but then I think taken other break. Mister Dunbar and it works, because this is where you know the Weber really hit the road I like it happens. It happens to all of us, live here at home, Can you wish somebody could just bring use of beer? Some wine, some liquor, delivered right to your house, and somebody has finally decided to do something about it that saucy the alcohol delivery act. They deliver your favorite wine beer liquor to your door. On demand its goober. of the hall and, if you're, in LOS Angeles, stammered, Cisco, Chicago, Santiago or Sacramento, you socio to war right at your door in thirty minutes or less ready to drink after the rest of us.
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but there's another and that's a target that they'll have to me under the Senate, budged, reconciliation rules, but another piece of the book Reconciliation, Rasa process, one of the conditions of using this these special privileges to pass a bill with only fifty votes is that you can increase the federal D said outside of that ten year window. So twenty thirty years down the line, your plan cannot be continuing to increase the federal deficit, and I know my thing Dylan wrote about this yesterday. It would appear you know, I'm not the c b, o er the adjacent see tee, but it would appear that, given the way that this plan is increasing, the deaf in your ten. It would certainly be continuing to increase the the deficit in your eleven, and in that case, you're you're running into problems and in the Senate rules be, I ever.
Budget analysed I've seen whose looked at as a site like unequivocally in your eleven? This is increasing the deficit we used like ponder this further by because I think people have been saying people meant doing like their tax reform is hard takes four months and they ve been working on this for months and they just like on a basic level. just like they didn't complete the assignment. Right, I'm right. Thank you. Tell the class go right as the ethics boil and they just like they didn't like this bill. If fifty one United Sates senators announced tomorrow, you know what Paul Kevin you nailed it on a vote for this bell. It would just all fall apart in a puff of smoke. Granted they didn't write the Bell rang like if this bill were put, on the floor in the Senate, someone would raise a point of order and say, like this, violates the rules in the parliamentarian with it yeah you're right and they wouldn't be able to pass it like. They have just pointed out,
You said, like everyone has talked about how hard this is and how you have to make tough choices to like make it work with the Senate rules, and that is still we hard and they have not done the work threatened, and I think it seems telling how they they had to torture themselves just to meet the one point. Five trillion dollar number for the first ten years and that clearly they just had no appetite for figuring out how to actually make this sustainable overlap and is dissipated. There were balloon thing with the state tax rate which like to fit the one one five trillion dollars ceiling. They dont fully repeal it until the back five years But that means that it's, like you look worse as you as you go further right, since they were trying to meet both. the one point, five trillion dollar limit for the first ten years and this they have said balloons in different directions for different policies, like even there
this new or they haven't enact. They propose this new three hundred dollar per person, tax credit for, like other people in your house, a little children so like if, if you're elderly parent is living in your house, you get through hours as a credit for them, but us a year like your team, but also your julia because, for some reason the child had tried, it ends its sixteen. Having as a little I mean that's fine, but it is little counter to active yeah. It's the gorilla things wrong with the child task to introduce this, and then it freezes out after your five policy reason to phase it out after your five. The idea is not that it's like a less hard to have it senior living in your house after after your five. It's just that they don't want to raise taxes in error. They don't want to increase the deficit too much in the outer and so you have a bunch of provisions like that and the new provisions, like the estate tax there doing, like literally the opposite purpose,
The result is you have the sort of jumble of things that adds up to increasing the deficit in the first ten years and also increasing the deaths and after a faint work. Try you, I think you could explain the phase in phase out gay pretty clearly way, which is that their taking things that they think are popular and politically defensible. like the these just or a new tax rates for middle class families right when coal mines as typical fan. he's gonna save eleven hundred dollars there Tommy primarily about this expansion of child tax credit and the creation of of these new sort of non child, whatever credits, so then that new credit expire after five years, and one reason that it expires after five years. Is that Republicans think it's really good right, like they think you could put and extend our bill for that on the floor and Democrats were probably want to vote for it or they didn't want to vote for it, and that will be tough, but
because, like there's, a good idea and another thing that expires is immediate, expensive of business investment, which is like obscure. Topic, but something that has a lot of expert support, even though its fairly love it quietly and something that just also, you know it businesses will say. Okay, if you let this expire, like our investments, gonna fall off a cliff next year and Democrats will be at least reluctant to do not go along with that of versus state tax. Repeal right, if that was phasing out Democrats, is eight yet right like that's. That has actually happened when, when George W Bush eliminated the estate tax, and then Democrats demanded a combat exact right. So it's it's really it's it's like it upside down universe. Words like they're taking the stuff that, like they don't they have strong arguments for and making that permanent and they're taking the stuff. That, like is more
appealing about this plan and making it phase out, hoping that they can set up this like clever game chicken. But your turn, we were saying they haven't made it even with these phase in phase out things like it, it doesn't add up the famine, salt long term problem and it seems like the way I see it, as is the only way to fix the long term deficit problem. Is you either allow the tax cuts to expire, which Republicans are very reluctant to do and corporation? Certainly don't want them to do, the corporate side or your look now, you have to start looking at other savings like entitlement reforms and stuff. That's gonna really make the politics of this a lot less. Here too, he's been sort of a mean that I want to push back at where people are saying they can't let it expire because they tried that with the Bush tax cuts and it didn't work that that the tax cuts didn't stick, which I feel is a really deep misreading of what happened in twenty two and twenty twelve. It is
fruit. That Obama and Democrats in Congress successfully pushed to get certain tax increases for rich people, both in the estate tax and on the top bracket, but like ninety five percent of the Bush tax cuts which affected serve the brackets below the top bracket, are here permanently like, even by two thousand and eight in the democratic primaries, like both your Clinton and brought about more safe we totally dont want to get rid of the Bush tax cuts for like people making below x, number x number. In the six figures, and like that's power, but they re able to use the Senate rules to permanently or like mere permanently. It's now like sixteen years later, to alter what income taxes look like for most people and even if they didn't get this were very top. Of that, but still an important enduring thing and in the same thing happened in two thousand three that they they said that, instead of taxing
evidence as normal income. Your taxes on capital gains. That was a new thing. Something the Democrats fought back at an hour. a normal part of the tax, so that no one really disputing. So I think it's totally possible that this somewhat. Cynical game there plain where the advantages fur from middle class people phase out like works and that when it comes- I'm too. The phase out like Democrats will fall to end and help them make a permanent way, but I mean this still did question of. Can you do this with the corporate rights I am wondering what the Bush taxicab packages that Democrats accepted in the years two thousand and two thousand one the premise that taxes were too
hi it in the United States. I mean this is like ancient history, but like there was a budget surplus and the Democratic Party at that time was not prepared to say. We believe that its appropriate turn a structural deficit of two to three percent per year and therefore we want to increase federal spending. a large amount not offset by any taxes. They instead said no. We actually want to do a large tax god, but it was like different and not quite as big as Bush. Accident, at which one reason that a minimum bushes Texaco was ultimately put on the four twelve Senate Democrats voted for it, and so I dont know right a thing with his corporate tax.
Is this not an enormous democratic appetite for like a trillion dollar business tax God? So it's up obvious to me. The Democrats would fold unextended get me. Maybe parts of it depending on what it is, but anyway, Republicans feel strongly that what matters to drive economic growth is these very top rates right, so I mean in their head. They think that they failed, and that explains why they're doing right now, Jack. I mean that that might be true, I'm just saying like in. In reality, they are like permanently alter intensive, amber liners But you know, like a lot of things in politics, are driven by the fact that by liberals and conservatives care about different things right so, like broadly speaking, since nineteen eighty liberals feel like they ve been losing because inequality has gone up so much because I really feel like they ve been losing because the welfare state is.
And in an answer, you can have some of that on taxes ride, so it's like taxes are lower than they were pre Bush by taxes on which people are higher. So it's like everyone loose or wins, depending on your ear ear, so bright priority but I mean, has there been our son? publicans like talking about this book, they can do. It seems like a word, a what, thing that we heard of in the Trump years it's just kind of people like beating up and Senate Republicans, as if the house has been doing amazing work, Actually, they just have different rules, yeah and the Senate. Yet the sentence problem. Is there such a thin margin for error? There are fifty two republican senators and fifty of them will have to vote for this bill. If it's going to pass, you know, I think it's important to note, of course, that the Senate, much like we saw healthcare debate. The Senate is working on their own tax bill that they will unveil Zimbabwe sometime soon, and so
obviously how that differs from what the house proposed will be an important element of our know how this goes forward, but that that very thin margin for error, I think, is already sort of reveal itself and how problematic that could end up being for anything that looks like the tax plan. First of all, an element, we didn't have in the health care debate, as you now have two republican senators who have said for this we oppose the tribe and who have said that they don't want to both for attacks build. It dramatically increases the deficit which this one obviously would like that's baked into the way that it structured and Jeff flake zone, a senator who has said that he is not going to run for reelection next year, was on the Senate floor yesterday, saying that we can now we can increase. deficit? We can't believe the magic economic growth is gonna make up for what what this bill appears to do and then so you have a handful of people like those you up. Like Marco Rubio, who wanted a much more dramatic increase of the child tax credit you have always.
The moderates, like somebody like Susan Collins, was already defied the party on health care and is not interested in seeing the estate tax repealed. So I don't know who MIKE rounds in his bed We also think that he's from South Dakota he's he's he's dull, but occasionally surprise, he's generally ago along to get along guy, but he tries to be have kind of a bit of a maverick straight with point being you can already come up with a list of like eight look and senators who are least not thrilled elements of the attack of the House bill or big parts of it like how much increased the deficit, and it's not clear to me how anything they come the Senate that remotely resembles the House bill is going to be able to get two hundred and fifty other than this overarching. We have to do something because we already failed on healthcare, So I don't even know where to go. There's like so much going on in this bell, but in the spirit of of credit. Where do let's have about that?
some good ideas. I think in this, but I think I think, over all of the sudden conceptual purpose of this bill is like to finance a giant tax cuts for the rich, which makes good ideas for a worthless but is still out there. I think I think, there's things here that that you might want to do or that if they were enacted. Let's say like I wouldn't want to see and re arms or things, Maybe the best idea that has remained in this is that the further limit the mortgage interest deduction I've noticed when I write about how bad the mortgage interest deduction is like a lot of like otherwise liberal Fox readers, get very upset because they rely on the mortgage, interested action and think of it as a middle class benefit, but It's the main way that we subsidize housing in this country echoes overwhelmingly to upper middle and upper class people. It's like images homeowners at the expense of renters and, in particular, poor enters sociologist.
Matthew, Desmond read this incredible buckled. Evicted everyone should read if they have an already has a really good piece in the New York Times to serve on how bad the margins section is for an inequality in and how it harms low income families, so they don't get rid of it, which which hopefully one day, while what do when I'm like eighty five, but then do women the amount that you can deduct interest from from houses currently like it, First, a million dollars and value of your mortgage. You can deduct interest for each of your first to mortgages, of equal, your first, you Margaret and they D. get rid of the second mortgage deduction and reduce the limited? half a million dollars, and so for the best There are people who live in like normal areas, the country where a hundred and fifty thousand dollars is a reasonable price for a home. This doesn't change thing for you, but for like apple and people, firstly, in like high cost urban areas, it's a big.
You, although I mean I should say I mean really. If you look at it when me, even in California, the media in the house is three hundred eighty five. the in D C, because DC is if DC was a state. It would still be a city. It's even here, the mad, but it still its four hundred thirty thousand dollars. Most people obviously lead than a hundred percent of the value of your home is mortgage debt. If you haven't done something: that's gone badly, rye and, of course, most people who bought homes have at least partially paid them down random in what most people didn't take on a mortgage, So, broadly speaking, I mean this is a small limitation, the only people who can hit with Like get tax bill out it S. A really quite rich, I mean there's no place in America that is so expensive that the typical person has
one point to five billion dollar home that they took a mortgage out on last week. Right, you know, I'm like that's, who pays like the full freight here dislike like it's interesting because their home builders are opposing this plan and they also oppose this mortgage thing but the changes actually like too small to justify this, that their opposition to it is driven by a very complicated calculation that increasing the standard deduction is gonna mean that just you were people take the mortgage. That is another good part of this plan has that were also We, as as people have done, taxes will remember, you can either take the standard
action or you can itemised, and so, if the value combined value of the state and local production and the mortgage interested action and the terrible deduction and and a handful of other much more deductions serve add up to more than a standard deduction. You do that, and so it follows from that that if the standard direction is lot bigger, more people will take it, and so these of incentive effects of the other deductions or less powerful, and so this plan roughly doubles the standard action for both individuals and and couples, and that's can mean a lot fewer people taking the mortgage interest deduction and to further limiting its power. So if you think the mortgage interest reduction is bad and I think it's extremely bad, then that's that's a positive step, and also just like makes it more than we simpler to do. Taxes like the simplest thing would be to just tell the government to do your taxes, because I've
all the information they need to do that, but assuming we're going to continue to do this stupid system work, he bought the file their taxes, the rear, like it's better. If people can do that with a standard adoption and having to go through an item, I sense that the actual complicated that anything anything you like him in finally taken it from those freeloaders with large medical bill. I do am. I dont know if there's anything I like per se, but I do yeah there's there will be some interesting like I already know. Yes, the one of the deductions that's being eliminated as on medical expenses, and I am sure there will be some people who will that'll be offset by the doubling of the standard deduction, but I other presumably gonna be some universe of people who use are either and long term care or have no alot of medical. women in their home or some kind of your medical, mission than necessitates that that are going to be hit by the elimination that deduction. I already know that the air P has already can reach out to me like hey. We should talk about this because we're very upset about it. The medical device manufacturers,
Can we didn't get their european? That was interesting to me. I don't know if it's a surprise or not, but there was no you'll after failing to repeal all these Obamacare taxes that they hated so badly, they didn't even then go there now, not even the medical device, not even the medical, Elizabeth Warren and our drinkin hate, because they have medical advice. Twenty five votes for repealing now four years ago dislike dead and now it seemingly I don't know why my per favorite thing in this is this. Its super nerdy, but they switch the inflation indexing of the tax brackets from the current consumer price index for all urban consumers to the chained consumer price index. For all her big consumers we have of this chain sepia before normally as a stealthy way to cut social security benefits, which I do not agree with, but I do agree with the science behind it. The deserve better wait. Regulate inflation and now we're using superior science to raised
it is on everyone over the long haul, which I think is. That is a great idea because they eat did the genius of it. Is that, like it just means that that tax share of GDP, while I go up a little bit each year, Europe yeah, just as a result of the normal, healthy process, the economy before my own Reagan, the tax records warrant, inflation indexed at all, This is the most important thing that nobody knows about american politics, but like in the good old days of the new deal coalition, you had progressive income, tax and unex. it gets so was like every year. That was just a big tax increase so then a couple years. Congress would cut taxes which with sensible, because the recent accidents be going up all the time, but if you wanted to increase spending on new things, all you had to do was like not cut taxes as much as you might otherwise have cut taxes
whole game was like incredibly rigged for liberalism, and we got tons and tons of great stuff Reagan. Put a stop to that in his like big eighty one tax guide. Almost all of this specific tax provisions of that bill ended up getting rolled back, but but not the inflation indexing, so Kevin Brady slightly walking back inflation annexing brackets. This is like that that one's a keeper Gallagher brain. You know it's it's it's again, and I don't know about these specific individual deductions like I just I felt like the tires when I on that one in yesterday's goes to serve initial discussions. It was like a lot of mortgage talk, but my right, we succeed sick people right still allow reform movement, orphans, Cuvier, kids, with student loans in the medical expense
action in its small in the scheme of things, but it's a very concentrated thing in a rare itemised reduction that is mostly paid by like poor and low income people yeah. That's why it's very rare that you have so much to deduct as a poor person that its larger than though the standard at actions You don't have a lot of money to donate, to charity and typically, don't have a mortgage, but if you have liked rushing medical emergency, yet at adds up really really quick colonizing. That's why our peers wary, because these are probably people in your my up home, Happy Home Health AIDS people have like medical equipment and their homes. He adds that its people in dire circumstances where private, taking advantage of this to duck animals to say I mean one in those on and on the politics years that you know getting rid of all deductions is. I was a hard because all the objections have defended but at least you can say, ok what we're doing here for getting rid of all deductions and were making the standards reduction bigger. So that's like the new
In the new system you have a bigger send rejection and all the judgments go away. When you decide you ve gotta keep a couple ride so like they're keeping the charitable production because charity some good and they're, keeping mostly keeping that the mortgage deduction cassettes popular in and whatever. Then you got a problem, because I can't Hey too, like the old lady with heavy medical expenses. No, no! No! I'm not like targeting your tax break for elimination like we're we're forming the whole system because, like you, are targeting her tax breaks for elimination like it's. That's what you can say like well. Mortgage charity, like those of the most powerful ones, will keep them and will make it easier, but it makes the knife like sharper when you're hitting other people, like, I think, sophisticated,
Ex policy. People will say that if you wanna like curb deductions, you just do a general limit on all of them. Like Obama tried to do this by, like women need everything to twenty eight percent value. If you want to be more dramatic, you could do what Mitt Romney proposed and put like a dollar value. So you could say that that now and can claim more than fifteen thousand. I did actually want, but only fifty thousand then especially if you don't inflation index, that to get back to my previous point like overtime, you just kill off with his, because that that amount doesn't increase and like that lets a poor family that actually has fifteen thousand dollars and medical expenses keep that you can honestly say to your constituents, I'm not getting rid of all these deductions. You care about very deeply, but you're like slowly making the kind of progress the people want it make against these data. individually is wiping out popular deductions, its
bigger Paul's. It's like a really stupid way politically. To do this. I will also be interested to hear from charities mean that the home builders caught that this standard direction doubling is bad for them, the the insidious charity lobby, the United States does not yet seem to have like cutting down to this problem, but others it's exactly parallel. Rare there's an ideological element this right. Like a lot, those charities are religious groups of people who would affiliate themselves with conservatives and there's just an underlying conservative belief that Parity is good in part because it offsets the need first, state welfare, and so I can buy why a republican plan would be like we don't want it tongue dry donation knew no, I mean losing you that's what I mean is, I think I think they did the math, and this is what we don't want to target charitable donations, but the kind of deal
bright red, they don't want to. So if you just if I don't actually know who, like the big players, are in that but like if some teardrop ionization looks at this and now wait a minute. This actually by doubling the standard direction, greatly reduces the incentive to give us money we're going to raise an objection to it. I don't think that's a group. That Republicans are going to be like. Well, you know who cares about you re? They were Poland's care. A lot about travel in and to appoint minor soon. Believers mark meadows, ahead of the room carcass, has been pushing a proposal to make the what action was called and above the line deduction, but you can claim, even if you take the standard deduction, this is a pretty expensive thing. That is just like a windfall for churches, and I would expect them to lobby pretty hard for that, especially when they realise that, like they're gonna be left worse off by this anyway, as we can see, here there's a lot of potential. I think
on changes. People going to ask for here and there have very little room to make actual changes. So I think that we are going to have plenty more episodes on this subject. I think this express train vote by Thanksgiving or whatever it is their saying not going to happen to say thank you to both Dylan's for being here. I thank you to act, Peter Leonard, for producing what are we to plug for the weeds Facebook group? It is a great place to discuss We see policy issues and other exciting things. I was doing some comments and there are a couple days ago, placed answer continue. The conversation we'll be back next next that would be more weight.
Transcript generated on 2021-09-13.