Congress is about to take up one of the most important pieces of legislation in a generation, a tax reform proposal that will affect every American, every business and our entire economy for years to come. Here are some initial impressions, based upon conversations with economists, tax experts, my colleagues and Maine people:
1. The process is atrocious. In the Senate, a decoy bill was given to Finance Committee members last Thursday afternoon. The bill was then revised Tuesday evening to gut the Affordable Care Act’s individual mandate and make many individual tax cuts temporary, fundamentally changing the bill at the last minute. There have been (and will be) no (as in zero, nada, zilch) hearings on the bill’s actual provisions, so the committee will vote this week with no substantial input about the bill’s likely impact. By comparison, the 1986 tax reform effort involved hundreds of hours of hearings. It will likely take the Finance Committee less than 72 hours to advance the bill on a party-line vote. This is a ridiculous way to make policy, especially policy of such critical importance. A town council in Maine amending the leash law would do better than this.
2. The heart of the proposed bill is a giant, unfunded cut in taxes for corporations and wealthy individuals that will add at least $1.5 trillion to the federal debt over the next decade. This is on top of about $10 trillion being added because of unbalanced budgets projected for each of those 10 years. An unfunded tax cut — where we borrow to fill the hole — isn’t really a cut at all. Rather, it’s simply a shift of the tax to our kids, since they will eventually have to pick up the tab.
3. Deficit-financed tax cuts will come back to haunt us. Ironically, the bill’s loudest advocates not so long ago preached budget austerity because of the ballooning debt. They were right then, and they are tragically wrong now. The cuts in federal spending required to avoid economic disaster when the debt comes home to roost inevitably put Social Security, Medicare and Medicaid in the crosshairs, not to mention national defense, student loans, VA benefits, infrastructure, job training, research and development, and all the other federal programs that contribute to our quality of life, national security and economic well-being.
4. In spite of a lot of wishful thinking, tax cuts never “ pay for themselves.” In the long run, the drag of greater debt is likely to cancel out any small positive economic effect from tax cuts.
5. Gutting the Affordable Care Act and phasing out individual income tax cuts give away the game. It was already clear that many of the tax provisions had little to do with economic growth and more to do with lowering taxes on higher-income taxpayers. But the last minute changes to the Senate tax bill show just who this bill is really intended to benefit. Repealing the individual mandate would result in higher premiums and cause a substantial reduction in the number of people with health insurance. Phasing out tax cuts for individual taxpayers means that tax relief for middle-income taxpayers will fade over time. Meanwhile, corporate tax cuts are made permanent. In short, higher premiums, more uninsured people and increased taxes on middle-income taxpayers are all there to help finance tax cuts for corporations and the wealthiest individuals.
6. There is no reason this has to be a Republican-only process. I know plenty of Senate Democrats — and me — who are eager to see real tax reform that strengthens our economy and makes the system simpler and more equitable. We should cut our corporate tax rates to be competitive in a global economy, but cuts should be financed without adding to the deficit. In addition, there should be meaningful middle-class tax relief like a more generous child care credit, rather than a hodgepodge of temporary changes that will hurt almost as many taxpayers as they will help.
7. It’s clear that a thoughtful, nonpartisan solution is likely to be more lasting, more broadly accepted and better than one that limps across the finish line in the middle of the night. Let’s slow down, open up the discussion, and be sure we understand the impact of what we’re doing. We owe the American people no less.
Angus King is an independent who represents Maine in the U.S. Senate.
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