Indivisible Yolo Podcast – Tax Scam Holiday Special2018-01-07
On this week’s podcast, Isabel and Andy dig in to some of the details of the GOP Tax Plan (or #TaxScam).
To start, the bill claims it will give savings to Average Everyday Americans. Speaker Ryan and other GOP members have claimed that the bill will save the Average American about $2,000 on their taxes, although the actual number from GOP and non-partisan analysts is $1,182. Many members of the GOP have been touting that it’s an increase of roughly $22 per week (or $88 per month), directly into the pocket of the Average American.
To start, using an average is misleading. Isabel points out that she and Barry Bonds have an average of 381 home runs, she and Apa Sherpa have climbed Mt. Everest an average of 11 times, and that she and Bill Gates have an average net worth of $45 billion (that’s $45,000,000,000). Which is to say, if the tax bill gives a millionaire a $10 million tax break, and someone making $7.25 – minimum wage – nothing, they still have an average savings of $5 million (that’s $5,000,000). In this case, a better metric would be median savings, the same way the census and other agencies use a median to measure things like household income, because averages can be skewed by outliers.
In addition to misrepresenting the savings by using an average instead of a median, the GOP are ignoring two major disasters in health insurance – the repeal of the individual mandate, included in this bill, and the non-renewal of CHIP’s budget. Repealing the individual mandate, which would mean that individuals would no longer be required to have health insurance, will destabilize the healthcare markets, which makes the cost of health insurance increase, and will decrease the pool of healthy, insured people, which will make health insurance overall more expensive. Plus, low-income families will no longer have their children’s health insurance covered by the Children’s Health Insurance Program (CHIP), which, for a family of four with two children on CHIP, could mean an increase of anywhere from $400 to $600 per month. It really cuts into the $88 per month in savings they’re supposed to be getting.
Thankfully, despite all the pro-#TaxScam propaganda, the bill polls around 30%, and many who are currently in favor of the bill do not realize that, especially if they live in California, their taxes are actually more likely to increase as a result of the provision that removes deductions for state and local taxes (SALT). SALT primarily helps people who live in high tax states, by allowing them to deduct the taxes they pay at the local or state levels from their federal taxes, to avoid paying those taxes twice. People in states like New York, California, and New Jersey in particular are set to lose large deductions as a result of this repeal.
Another talking point being touted is the idea that reducing taxes on the wealthiest Americans will result in job growth and reinvestment in the economy – the Trickle Down Economics theory, which is a myth. The past three presidents who implemented trickle down or deregulation policies have either crashed, stagflated, or recessed the economy. A lack of regulation doesn’t provide for more growth, it paves the way for speculation and practices that prey on the poor, which result in bubbles and subsequent bursts. The U.S. has a long history of speculation leading to crashes, from speculation in the 1800s around gold and silver, to speculation and deregulation in stocks in the 1920s, to speculation and deregulation in 2008 around housing – none of which ended well for the Average American. Even today, we’re seeing a similar pattern with predatory and speculative auto loans, not unlike the housing loans and mortgages that were common prior to 2008, and a rental market exploding with little to no protection for consumers and renters. This type of deregulation, tax cuts, and invitation of speculation has resulted in recessions and crashes, and that means money being taken out of workers’ pockets.
In addition, CEOs have flat out denied the claims that they will reinvest in the economy, job training, or wages. They will buy back stocks and pay greater dividends, which doesn’t help the Average American, but rather helps stockholders and company executives. Wells Fargo’s CEO in particular has been on the record stating that his company will invest back in the company so that they produce greater profits and dividends every quarter. Well Fargo is also being used to put a positive spin on the bill, since they announced they will be raising employees wages to $15 an hour in the coming year. While the GOP and right wing media have touted this as an effect of the #TaxScam, they ignore that Wells Fargo had announced this wage hike back in September, before the tax bill had even been drafted. So, Wells Fargo had the means to pay its workers $15 an hour before its taxes were cut, but yet the tax bill will benefit them to the tune of $3.7 billion (that’s $3,700,000,000), while their CEO makes about $19 million (that’s $19,000,000). The company has promised to donate $400 million to charity as a result of the windfall, but that’s less than 2% of its total gains, even combined with the pay increases for workers.
Other companies like AT&T have promised to give all employees a $1,000 bonus because of the bill, but that’s only a one time thing. Meanwhile, the new tax laws that apply to corporations have no sunset date, meaning they’ll never expire unless the laws are changed, while individuals will see their tax deductions disappear in 2027. The bonus is clearly aimed at making the tax bill more popular – rather than investing in American workers by giving them a 5% raise every year to keep up with the cost of inflation, creating pensions and 401(k) matching programs, or expanding health insurance benefits, they are choosing to give a one time bonus of a measly $1,000.
Another reason companies are raising the wages to $15 and giving bonuses is to draw support from the Fight for $15 movement, but they and others are already pivoting. Previous guests Sarah Zimmerman (Podcast 11) and Sean Raycraft (Podcast 5) have talked about how the Fight for $15 movement is actually the Fight for $15 and a union. Thankfully, the movement and others have already pivoted. They’ve achieved their $15 minimum wage ($31,200 per year), but now they’re fighting for the right to unionize at these companies, because they realize that while the $1,000 bonus may be popular, it doesn’t last the same way wage increases, health benefits, and pensions do.
So although certain companies may give out slightly higher bonuses this year, the Average American will actually see a tax increase. The median household income across the country is $59,000 per year, with the median in Yolo around $54,000. Non partisan organizations have estimated that households earning below $70,000 per year will see their taxes increase – that’s about 24 million people – by as much as $800 per year. So, not only will that one time payment of $1,000 per year be eaten up for many by $800 in new taxes, they’ll have to shoulder the burden of those taxes in subsequent years, without the benefit of that $1,000 bonus.
The GOP doesn’t seem to believe this, though, in part because they don’t seem to understand what the Average American is. In a tweet, John Cornyn suggested that a married couple earning $100,000 per year via $60,000 in wages, $20,000 in non-corporate business income, and $15,000 in business income would see their taxes decrease. This model of income is not typical, and that the figures are much higher than the Average American earns (keeping in mind that the median income is $59,000, not $100,000). In fact, this model of income is more in line with how lobbyists and political donors make money – they earn salaries, have bonuses or stock market gains as non-corporate income, and have ‘side’ businesses like real estate. Looking at Senator Cornyn’s tweet, it appears that they took this model of income, slashed a few zeroes off the end, and went “this looks about right.” Ultimately, this says a lot about who is behind this bill and who it’s intended to benefit.
Its beneficiaries, in addition to the corporations, include Congress. Bob Corker, for example, is now able to pass almost a third of his $69 million ($69,000,000) net worth on to his children, tax free, and will be able to take advantage of a new real estate loophole. Corker earns around $7 million per year in revenue from his real estate enterprise, which is considered “pass through” income, as it passes through his personal tax returns (in this case, people are corporations, friends). In the new bill, pass through income will only be taxed at 20%, so Senator Corker’s $7 million ($7,000,000) per year, and Donald Trump’s $68 million ($68,000,000) per year, will be taxed at lower rates than people who make $75,000 per year. Corker is a notorious deficit hawk, and has gone on record saying that he will not vote for any bill that raises the deficit – even by a penny. But, after the real estate loophole was introduced to the bill (penciled in may be a more accurate term), he switched his vote.
Ultimately this #TaxScam penalizes the poor to benefit the rich, handing the poor a death sentence and the middle class a bill. And the intent to harm is clear, as Senator Ted Cruz points out while pontificating about the merits of the bill. The bill repeals tax deductions for state and local taxes (SALT), which will particularly harm residents of California, New York, New Jersey, and other high tax, left-leaning states. Cruz says “the only people whose taxes are going up are the really rich. The middle class, their taxes are all going down; the working class, their taxes are going down; every taxpayer, their taxes are going down. Except rich people, in Manhattan and San Francisco, some of them, their taxes may go up.” A few things in this statement are demonstrably false. First, as we mentioned previously, those making less than $70,000 per year are likely to see an increase in their taxes. Second, the implication that everywhere in New York is like Manhattan or everywhere in California is like San Francisco does a disservice to the diversity of states, and plays into the false narrative that all New Yorkers or Californians are “coastal elites.” Third, the idea that everyone in Manhattan and San Francisco is rich is laughable. What he is right about is that people in Manhattan and San Francisco will see their taxes go up, but it won’t be rich people in those cities, and it won’t be confined to the cities. Poor and working class people across these states will feel the blow of SALT repeal, which is clearly intended to harm states with high taxes that tend to vote blue. It is a partisan move, with obvious intent to harm, and it may be a death sentence for many struggling citizens in high tax states.
But the intentional harm doesn’t end at states that vote blue, it’s also piled on to Puerto Rico, which is slapped with new taxes even in the midst of recovery from a national disaster. Despite the majority of Puerto Ricans being without power, without water, and being wholly dependent on charitable organizations – rather than their own government – for aid, and despite Puerto Rico’s debt crisis prior to the hurricane, the GOP have opted to raise taxes on the vulnerable island’s residents.
Vulnerable kids are in the line of fire, as well, since Congress has failed to re-authorize a budget for the Children’s Health Insurance Program (CHIP), which provides 9 million children with health insurance. This means funding will run out in 2018, and parents will either be forced to pay higher costs to have their children insured, or leave their children uninsured. One father, who works as a layer for a non-profit, but doesn’t make enough money to insure his two children, will see an increase of $600 per month if he adds them to his plan. Even if he were an Average American who got a tax break of $1,182 per year, that would be eaten up within two months by his increased health care costs.
The worst part about CHIP is that Congress has known that funding will run out, and has actively not made reauthorization a priority. Congress sets its own deadlines for its budgets, and has known since April of 2015 that CHIP will expire in September of 2017. They have known for more than two years, and they have done nothing. And time is running out. CHIP has been funded through the end of 2017, but many states have already run out of funding. To compensate, states with excess or larger budgets, like California, have donated money to other states in an effort to keep these programs running until at least the end of 2017. But that creates a deficit for these generous states, and means that they too will be shutting down their CHIPs come January 31, 2018. 16 states have plans to either completely cut or begin phasing out children’s health insurance by January 31st: California, Nevada, Oregon, Washington, Idaho, Utah, Colorado, Arizona, Texas, Pennsylvania, Minnesota, Florida, Virginia, D.C., Delaware, Massachusetts, and New Hampshire. Together these states represent 5 million of the 9 million kids on CHIP (that’s 5,000,000 of the 9,000,000 children), so that’s 5 million kids that will be without health insurance starting on January 31st.
States are trying to mitigate the problem. Many are trying to get kids, particularly very sick kids, on to Medicaid, but it’s not a process that happens overnight, and states are scrambling. Some states are so overwhelmed they are simply shutting their programs’ doors. Notices began to go out on December 15th, and 9 million families will spend their holidays wondering how they will cover the costs of their children’s medical care in the coming years.
For perspective, the #TaxScam adds $1.5 trillion ($1,500,000,000,000) to the deficit. $1.5 trillion could fund CHIP, in its current form, for 915 years. Ultimately, this is a question of priorities, and since the deficit doesn’t seem to matter any more, where the GOP chose to spend the money – in tax cuts for billionaires – is a reflection of their priorities.
Senator Angus King, on the Senate floor, summed it up nicely: “We don’t know anything now that we didn’t know in the middle of September or in August – that we could have passed this program, but we just blew right by it. Maybe it’s because none of our kids are in this program. I’d venture to say that if the children of the members of the United States Senate were in the CHIP program, we would have met that deadline. But we didn’t.” The failure to reauthorize CHIP, in conjunction with the clear and direct benefit to members of Congress, is a succinct summary of the priorities of this bill.
Priorities that include repealing Obamacare, or the Affordable Care Act. While the bill isn’t a complete repeal, like President Trump is touting, it does repeal the individual mandate, which requires every person to have health insurance. The Congressional Budget Office (CBO) a non-partisan government agency that scores bills, estimates that 13 million people (13,000,000) could lose their health insurance as a result of this repeal. Additionally senators who had been working on a bipartisan effort to stabilize the healthcare markets, which would lower costs for everyone, came out immediately after the tax bill passed to say that their legislation had been permanently tabled and would never see the floor, much less a vote. Rather than support these attempts, the tax bill will destabilized markets, which will make prices for health insurance skyrocket. The previously mentioned lawyer, whose children are on CHIP, who will pay $600 per month if he adds them to his plan when CHIP runs out of money, could see that $600 turn into $800 or $1,200, or more as a result of destabilized markets.
Insurance companies and patients are, uniquely, on the same side in this fight. Insurance companies want the individual mandate because it helps them offset costs. Healthy people are cheaper to insure than not healthy people, and when they all pay into one pot of money, it helps even things out. Patients, in turn, want this for more or less the same reason: healthy people paying into the healthcare market brings down costs for everyone, because there’s less volatility – companies know how many people will be buying insurance (everyone), at what rates, and can estimate how many people will be sick or hurt and need to take money out. When companies know these things, they don’t need to inflate rates, because they can calculate more or less exactly how they’re going to cover their costs and meet their bottom line. When these things are uncertain, it means companies will charge more, in an effort to ensure that they don’t lose money.
This is a lose-lose for patients and insurance companies, but a win for a GOP that hates Obamacare. Many young, healthy people will see it as a win, as well, forgetting that tragedy can strike at any time, and that the purpose of health insurance is a safeguard against bankruptcy at the hands of a medical emergency.
The bill also includes a handful of horrific riders. Congressional bills normally carry benign so-called “riders,” but the #TaxScam has a few particularly troubling riders. The first is a provision that allows for drilling in Alaskan wildlife refuges – the Arctic Wildlife Refuge specifically. It was something Senator Murkowski desperately wanted, and is touting as a job creating provision, despite the fact that drilling isn’t expected to begin for another 10 years – meaning jobs won’t be created for another 10 years. Not to mention, ‘clean energy’ has been consistently creating more and more jobs, while coal, oil, and other crude energy sources have been in steady decline for decades. While this might create jobs for the lawyers fighting the suits against this drilling, it doesn’t seem like it will create many blue collar jobs, and certainly not in the near future. More importantly, this opens a door for drilling and sectioning off other wildlife refuges and parks across the country. The Trump administration has already reduced the size of Bears Ears park in Utah, citing that the government shouldn’t own that much land.
Another particularly unfortunate rider in the bill particularly for those with uteruses, is an attempt to define life at conception. The bill changes the language in the tax code around personhood, and defines the “unborn child” – the fetus – as a legal entity, and equates it with an actual child. The idea was that parents could begin saving for a child’s college expenses – in a 529 college savings fund – at the moment of conception. This is a preposterous idea for a number of reasons, not the least of which that most people don’t know the instant they’re pregnant. Adding 9 months of savings (at most, but more likely 6 months) on to a college savings fund wouldn’t make much of a difference in the grand scheme of things, especially considering cuts to higher education and subsequent tuition increases – to say nothing of how privileged parents must be in order to have enough money to save for college and have the knowledge to open a 529 fund. This change in definition is a thinly veiled attempt to define personhood at conception, and the first step in classifying abortion, or even a miscarriage, as murder.
Looking forward, our deficit will be growing by $1.5 trillion ($1,500,000,000,000), which adds to our current $25 trillion ($25,000,000,000,000) deficit. The GOP claims that this addition will be offset by growth, but the majority of economists disagree that it’s even possible. The bill is fiscally irresponsible, but the GOP has already made it clear that they’re looking to make cuts to ‘entitlement’ programs as a way to offset the added deficit. After the passage of the #TaxScam, the Chair of the Ways and Means Committee, Kevin Brady, said “we’re going to have to, over time, make tough decisions to restrain spending.” They wouldn’t have to do that if they hadn’t passed a $1.5 trillion dollar deficit increase. Some of the programs in the crosshairs include those that help the most vulnerable: Medicaid, Medicare, Social Security, food stamps, legal aid, and they may never reauthorize funding for CHIP, citing a need to cut costs. Student loan forgiveness programs are already in danger; a bill in the House would eliminate the program that allows students loans to be forgiven in exchange for ten years of government service, something many professionals – like veterinarians or social workers – depend on.
There are enough small things in this bill that every single person will be affected by it in one way or another. Many people will be devastated by it. Going forward, we must mitigate the harm, educate our friends and neighbors, and fight like hell to wrest power away from the GOP in 2018.