The Republican Tax ‘Reform’ Deserves to Die

Also, the piece originally said “Let’s say you’re a single man with no children at the top of that bracket, making $77,400. Now that you’ve lost your $4,050 personal exemption, the difference between your old exemption and your new tax-bracket savings is a negative $2,299.50.” It has been amended to “Let’s say you’re a married couple with no children at the top of that bracket, making $77,400. Now that you’ve lost two $4,050 personal exemptions, the difference between your old exemption (in a 25 percent tax bracket) and your new tax-bracket savings is a negative $274.50.”

Have a question for Matt Labash, ask him at [email protected] or click here.

Dear Matt,

When you last wrote about the proposed Republican tax bill, you seemed like you wanted to wrap a piano wire around its neck and choke it until its eyeballs popped. Now that final passage is here, and you’re hopefully feeling more Christmas-y, have you made a peace with it, and how will you spend your Trumpmas money?

Pollyanna

Beldingsville, Vermont

I presume you’re referring to the ironically named Tax Cuts and Jobs Act, that doesn’t provide much of either if you’re a middle-class wage slave. The bill that Paul Ryan—who is ever eager to set the bar low, then to throw himself a party for clearing it—has called “a promise made, and a promise kept.” The bill that the once seemingly principled Bob Corker said is “better than the Bible, which I also haven’t read all the way through.” (I made that up.) The bill that President Trump called “a great big, beautiful Christmas present to the American people.” (Unfortunately, I didn’t make that up.)

At the risk of sounding like an ingrate, I’m used to getting crappy Christmas presents. My sister-in-law, who fancies herself a prankster, regularly gives me gag gifts in the interest of my humiliation. One year, she gave me Spanx for Men. (I had the last laugh when I attended her New Year’s party sporting a ridiculously tight core beneath the otherwise soft contours of my Banana Republic sweater.) Another year, she gave me a soap ring called a “Weener Cleaner.” (Packaging copy: “Large or small or in-betweener, nothing beats a cleaner weener.”)

And yet, given a choice between Republicans’ “beautiful Christmas gift to the American people” and my sister-in-law’s Weener Cleaner? I’d keep the Weener Cleaner, since it has at least some utility, and would re-gift the tax “reform” package to someone I really hate, like a child-soldier recruiter or whoever decided it was okay to start using “architect” as a verb.

And the American people, by and large, agree with me.

According to surveys across the political spectrum, this plan—which after all, is supposed to provide tax relief, not usually a controversial proposition—is about as popular as contracting sexually transmitted diseases (25 percent of Americans currently have an incurable STD, whereas, only 27 percent think the Republican tax plan benefits the middle class.)

There’s a reason for this—the American people aren’t as gullible as the GOP hopes they are. When I last tackled the bill in early November (in a piece subtly titled “Kill the Bill”), I detailed the blinkered stupidity of eliminating the state and local tax deduction, which predates the current federal income tax system itself. You can read it here if you care.

If you don’t, I’ll give you the cheap-shot highlights, since if I don’t quote myself, who will?

I suggested re-titling the bill the “Robbing Peter to Pay Apple Act,” on account of it being a massive corporate tax-cut funded on the backs of individual taxpayers. (Even the wealthiest individuals are getting a 3 percent tax cut while losing many of their deductions, while corporate America is getting a 40 percent decrease, while keeping most of theirs.)

Alternatively, if you don’t like biblical titles, I suggested you could call it “The Republicans Pissing Down Your Leg While Telling You You’re Bathing in a Warm Mineral Spring Act.” Because while individual tax cuts only amount to $300 billion of the $1.5 trillion bill, estate tax relief comes to another $200 billion and a whopping $1 trillion goes to corporate America, who Republicans would have us believe are going to pass the savings onto us in the form of higher wages, lower prices, “reinvestment,” etc. This, even as all trends suggest that corporations prefer, as a matter of course, offshoring our jobs and training our robot replacements to giving us raises—which the new bill in no way discourages them from doing. Meaning the best chance we have of finishing in the money under the new plan is becoming a multinational corporation whose obscenely rich parents just died.

And yet, after re-reading my month-and-a-half old column, and after the benefit of reconciliation, with the hot tea of House legislation being cooled in the Senatorial saucer, I have but one regret: I wasn’t nearly mean enough.

This tax “relief” is an atrocity, a desperation play by Republicans who were hard up to display a legislative accomplishment—any legislative accomplishment—before heading off to face voters next year. So hell-bent were they on being able to say they cut your taxes, that they were willing to do so even if it meant raising your taxes. And there is no better illustration of this than in the elimination of one historical tax benefit that has now been slashed altogether: that of the personal exemption. If you’re not familiar with the personal exemption, your accountant (whose tax preparation you can no longer deduct—yet another gift from Republicans), certainly is. It affords you a $4,050 tax cut per person, per household, whether or not you itemize. For a family of four like mine, that’s a $16,200 annual savings—income that is not taxed at all.

Republicans have now eliminated the personal exemption, in their individual-taxpayer shell game, while trying to distract you with the shiny happy benefit of their ubiquitously-billed “doubled” standard deduction for married filers, which now goes from $12,700 to $24,000. (Not to pick nits, but Republicans—who have not proven so hot at math lately—are not “doubling” the standard deduction. If they were, the new deduction would be $25,400.)

But that aside, consider this: If you are currently a family of four in a state that has no state income tax, like Texas, and you take the new, improved standard deduction instead of itemizing, you are gaining $11,300 on the standard deduction side. A nice little raise. Until you realize that you have just lost $16,200 in personal exemptions. Putting you $4,900 in the hole.

Merry Christmas, Red America! You just got rolled so that Jeff Bezos could get a 40 percent tax cut. He really needs the money, too, since he’s only worth $100 billion. Which is more than the entire GDP of 128 countries.

But wait! It gets worse. Congressional Republicans would counter my numbers, saying that at least they offset the loss of the personal exemption (as well as capping or cutting a good share of your deductions from state and local income taxes to employee unreimbursed expenses), by doubling your child tax credit from $1,000 to $2,000 per child.

Which is great. Except for three problems. First, everybody received a personal exemption under the old system. But now, if you’re childless, to even get a fraction of the old benefit back, you’ll have to get procreating. Second, if you have children under the age of seventeen, while you’re getting an additional $1,000 per child tax credit, you’re losing their personal exemption, which shielded $4,050 from taxation per child. (So you’re still slightly short of what you used to be. New system = $2,000 tax credit per child. Old system: $1,000 tax credit plus $4,050 personal exemption = $2012.50 in a 25 percent bracket.) Third, if you have children older than seventeen, even if they stay as dependents until their mid-twenties—as children so often do these days – you get neither the child tax credit, nor the personal exemption. Instead, you get a measly $500 per dependent. (See note.)

The difference between, say, your 22-year-old college student under the old law and your 22-year-old college student under the new bill? You lose $512.50 in exemptions, per child. Some Christmas present. I’d rather get socks, or maybe one of those Pajamagrams.

Let’s say you’re just a working stiff with three kids who are of late-high school/college age, while you are also housing your aged mother who was just widowed and is suffering dementia. Under current law—before Republicans decided to give you “tax relief”—you could claim $16,200 in personal exemptions, not including you and your spouse (which would have given you an additional $8,100.)

Now, you’ve lost you and your spouse’s personal exemptions, while your four dependents—altogether—are only worth $2,000, total. ($500 apiece.) And even that deduction will sunset over the next several years, since Republicans had to resort to legislative gimmickry to get themselves in under the budgeting limit.

And if you itemize, forget about it. You’re now losing gobs of money on that side, too, since Republicans have capped your state and local tax deduction at $10,000, while eliminating nearly all of your business expenses. According to this Pew map of the nation, the per-claimant average of itemized federal deductions was $28,173, putting the lie to the GOP propaganda that federal form deductions are simply a wealthy blue-state phenomenon.

Congressional Republicans, of course, would huff that I’m being dishonest by not acknowledging that they also reduce individual tax rates, which they say will offset some of the problems I’ve outlined. But I freely acknowledge this. In most instances, Republicans are not only reducing taxes for the rich—the top rate for a top-income bracket married couple filing jointly will go from 39.6 percent to 37 percent. But also, they’re reducing rates for say, a couple two brackets up from the bottom. Formerly, joint married filers who made from $19,050 to $77,400 were taxed at 15 percent. Now, they will be taxed at 12 percent. Which seems like a good deal on its face.

Except that even if you top out in that bracket, your savings is only $1,750.50. Let’s say you’re a married couple with no children at the top of that bracket, making $77,400. Now that you’ve lost two $4,050 personal exemptions, the difference between your old exemption (in a 25 percent tax bracket) and your new tax-bracket savings is a negative $274.50. (See note.)

In the last month or so, I’ve repeatedly had some version of this conversation with any number of conservative-leaning friends, who tell me: “My taxes are probably going up, but all told, this plan might be a good thing.” Maybe they’re saying that out of tribal loyalty. After all, Republicans haven’t been good for much in recent years, but they’re always supposed to be good on tax cuts. Or maybe they’re just keeping their eye on the Dow. (One of the small comforts I draw these days—besides saying “I told you so”—is checking in on my surging IRA numbers, even if, by the time I’m able to touch it, the false-optimism bubble will probably have burst and I’ll be trying to barter cat hides for Ramen packets in my prepper colony.)

But if so many of our taxes are going up under a purported tax-cut bill, why should we all pretend it’s a good thing? Maybe it’s something else entirely. Like say—and I’m just spitballing here—a bad thing. As the over-quoted, yet ever-quotable, George Orwell put it, “Political language . . . is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.”

Would that pure wind, under the GOP, were tax deductible. If it were, we’d all be rolling in clover—every man, a Bezos.

Have a question for Matt Labash, ask him at [email protected] or click here.