Tag: trump tax cuts
Can We Stop Describing Trump's Tax Cuts As 'Populist'? They're Not

Can We Stop Describing Trump's Tax Cuts As 'Populist'? They're Not

It is infuriating to see the media and politicians, including Democratic ones, refer to some of Trump’s campaign promises as “populist” tax cuts. Clearly, they were poll and focus-group tested and likely helped him win votes (the Republican team is more competent than the Democratic one), but they are not in any meaningful sense populist.

Let’s start with the most plausibly populist: ending taxes on tips. This will help some real working-class people, especially in Las Vegas where a reasonable number of people do both have substantial tip income and pay taxes. But it will provide little or no benefit to the bulk of people earning tips for the simple reason they don’t pay income taxes.

If that is hard to understand, then do a little homework. The average weekly wage in the hotel and restaurant industry is $485. That comes to just over $25,000 a year, if a person works a full year. If this person gets $5,000 a year in tips then Trump saved them roughly $500. That’s not trivial, but probably not a big change in their living standards.

But working a full year is a very big “if.” Many people, especially in low-paying jobs, do not work a full-year. Health, family, or school may mean that they only work part of the year. According to the Social Security Administration, 45.6 million workers, more than a quarter of the total, earned less than $20,000 in 2023, the most recent year where we have data.

Most of these low-paid workers would have zero income-tax liability. This means Trump’s “populist” tax cut did nothing for them. If we want to help low-paid tipped workers, the obvious measure would be to end the sub-minimum wage for tipped workers. This has been frozen at $2.13 an hour for three decades, although most states have higher ones or ended the sub-minimum wage altogether. That would be a genuinely populist measure, which would require employers to pay workers more rather than have taxpayers subsidize a small group of moderately paid workers.

The story is even worse with the no-tax on overtime provision. One of the main purposes of the overtime laws was to discourage employers from forcing workers to put in long hours. The 50 percent wage premium required by the law was intended to encourage employers to hire more workers rather than to force workers to put in 45 or 50 hours a week, or more. (Remember, overtime is almost always mandatory, unless a union contract gives workers the option to refuse it.)

Eliminating taxes on overtime effectively has taxpayers subsidizing employers who force workers to put in long hours, turning the intent of the law on its head. The populist move here is to simply raise the overtime premium. We can require employers to pay a 75 percent wage premium for forcing workers to put in more than 40 hours a week.

We can even get fancy and make the premium 100 percent if employers demand more than 45 hours. Or, if we want to really get populist, we can have overtime kick in after 38 hours, or even 35 hours, as some other countries have done. This would be the populist move on overtime.

The no-tax on Social Security provision is even less populist for the simple reason that low and moderate-income seniors already are not paying taxes on Social Security. A beneficiary with an income of less than $25,000 a year pays zero tax on their Social Security. This is close to 40 percent of beneficiaries. Even someone earning $35,000 would likely only be paying a few hundred dollars in taxes on their Social Security.

As it turned out, the bill passed by Congress raised the standard deduction by $6,000. This will help many upper-middle income retirees, saving them $1,500 a year on their taxes, but do little or nothing for low and moderate-income retirees. Again, it would not usually fit the populist label.

The populist move here would be to increase benefits along the lines proposed by Senators Bernie Sanders, Elizabeth Warren and others. They have proposed an increase in benefits of $200 a month. That would mean little to higher income retirees but would make a huge difference to the tens of millions of beneficiaries who rely on Social Security for much, or all, of their income. We could even phase out the increase so that it does not go to higher income retirees, thereby limiting the cost.

The last “populist” measure was making the interest on car loans tax deductible. This is probably the biggest joke since it only applies to new cars. (Actually, new cars built in the United States.) The average price of a new car is now $48,000. There are not many low and moderate-income people looking to buy a new car.

This proposal may have a modest impact on shifting demand to domestic cars from imports, but we can likely count on our fingers the number of additional autoworkers employed. If we want to boost auto production in the U.S., something like the system of subsidies and tax credits in the Inflation Reduction Act, would be the more effective route. Oh yeah, Trump’s bill eliminated these.

Anyhow, we can give Trump credit for an effective political stunt in putting forward these tax proposals, but it is a lie to call them “populist.” Trump and the Republicans might lie for a living, but the media are not obligated to go along.

Dean Baker is an economist, author, and co-founder of the Center for Economic Policy and Research. His writing has appeared in many major publications, including The Atlantic, The Washington Post, and The Financial Times. Please consider subscribing to his Substack Dean Baker.

Reprinted with permission from Substack.

Senate Republicans Will Force 'Major' Changes In House GOP Budget

Senate Republicans Will Force 'Major' Changes In House GOP Budget

House Speaker Mike Johnson (R-LA) was reminded how small his House majority is when, on Tuesday, February 25, a spending bill narrowly passed in a 217-215 vote. The bill didn't receive any Democratic votes at all, but only one Republican, Rep. Thomas Massey of Kentucky, voted "no."

Had there been a few more GOP defections, the bill would not have passed. And now, according to Politico, the bill faces another hurdle: Senate Republicans.

In an article published on February 26, Politico reporters Jordain Carney, Katherine Tully-McManus and Benjamin Guggenheim explain, "Despite a razor-thin 217-215 House vote Tuesday, GOP senators indicated Wednesday they would not accept Speaker Mike Johnson's fiscal framework as-is — heralding a rough road for President Donald Trump's legislative agenda on Capitol Hill.That's not to say they want to start from scratch: Most Senate Republicans said Wednesday that they were prepared to switch to the House's one-bill approach after spending more than two months pushing a competing two-bill plan. But they want major, contentious changes to policy choices embedded in the House plan."

According to a Politico source, conservative Sen. Majority Leader John Thune (R-SD) told senators "that there will need to be changes to the House budget and that there will be an informal meeting next week to start trying to reconcile the two sides."

Thune, the Politico journalists report, described the bill passed in the House as "a first step in what will be a long process, and certainly not an easy one."

Sen. Mike Rounds (R-SD) said of the bill, "It doesn't fit the president's plan in its current form, so we would have to make some changes."

Carney, Tully-McManus, and Guggenheim note, "Immediately after the House approved its plan Tuesday, Thune called for any Republican tax bill to include a permanent extension of the 2017 Tax Cuts and Jobs Act. That was an implicit criticism of the House budget blueprint, which allows for $4.5 trillion in net tax cuts — which tax writers in both chambers say won't be enough to allow for TCJA permanency along with Trump's other tax priorities."

Reprinted with permission from Alternet

House Gridlock: GOP Factions Spar Over Tax Breaks And Medicare Cutbacks

House Gridlock: GOP Factions Spar Over Tax Breaks And Medicare Cutbacks

When Republican President Donald Trump started his nonconsecutive second term on Monday, January 20, small GOP majorities in both branches of Congress and a 6-3 GOP-appointed supermajority on the U.S. Supreme Court awaited him. But Republicans in Congress don't necessarily see eye to eye when it comes to funding Trump's legislative and budgetary goals.

Politico reporters Benjamin Guggenheim and Meredith Lee Hill, in an article published on February 9, detail some major tax disagreements within House Speaker Mike Johnson's (R-LA) Republican majority.

"Prominent House Republicans are privately warring over how to advance tax cuts that are expiring and President Donald Trump's long list of other tax demands — with Budget Committee Chair Rep. Jodey Arrington (R-TX) and deficit hardliner Rep. Chip Roy (R-TX) locked in a struggle against Ways and Means Chair Rep. Jason Smith (R-MO) and other senior Republicans," Guggenheim and Hill explain. "The dispute is hindering Speaker Mike Johnson's plan to advance a budget blueprint this week, as different GOP factions continue to squabble over the costs of the tax plan, how to offset them to reduce their deficit impact and possible cost-saving changes to programs including Medicare and assistance for low-income Americans."

The Politico journalists note that "budget hawks" like Roy and Arrington are "still scouring for additional and highly controversial spending cuts."

"The number that lawmakers had tentatively settled on last Thursday — around $4.7 trillion — would make it virtually impossible to implement anything above an extension of the expiring tax cuts," Guggenheim and Hill report. "House Republicans agreed during their White House meeting last week that they would permanently extend the 2017 tax cuts, which are estimated by Congress' official accountants as costing $4.6 trillion."

But a House Republican, quoted anonymously, told Politico that Roy and Arrington "will make the tax cut portion not passable."

According to Guggenheim and Hill, "Centrists and even some more conservative Republicans are also increasingly alarmed that Arrington keeps raising Medicare reforms as a potential spending offset, according to three Republicans familiar with the ongoing talks. Trump made it clear on the campaign trail that he doesn't want to touch Medicare, but Arrington has suggested a variety of changes to the program that would lower costs in the Ways and Means’ jurisdiction."

Reprinted with permission from Alternet

Trump Tax Cuts

GOP Fears 'Slow And Messy' Dispute Over Trillion-Dollar Trump Tax Cuts

As Republicans prepare to take over the trifecta of US government, the often divided party is up against a chaotic fight over "whether they should take up tax first this year or immigration," according to a Sunday Politico report.

The "big debate over trillions of dollars in tax cuts," Politico notes is "going to be long, slow and messy."

Brian Faler, the news outlet's senior tax reporter, emphasizes, "There’s a chicken-and-egg quality to the debate though, because it’s hard to know how much they need to raise when they haven’t decided how much to spend. And lawmakers will be subject to furious lobbying by those worried they’re on the menu."

Faler reports, "Deficit concerns are running hot in the House, where many Republicans say a tax bill ought to be completely paid for," but, "That’s anathema to party heavyweights like House Ways and Means Chair Jason Smith (R-Mo.) and Senate Finance Chair Mike Crapo (R-Idaho), not least because it would be extremely difficult to find enough offsets to cover the projected $4 trillion cost."

Faler also notes:

Smith has already signaled he’s ready to deal on the $10,000 cap on state and local tax deductions, amid pressure from colleagues representing high-tax states. Sen. Josh Hawley (R-Mo.) recently proposed a big, pricey increase in the child credit, to a maximum $5,000, from the current $2,000, per kid. Rep. Darin LaHood (R-Ill.), meanwhile, just rolled out a plan seconding Trump’s bid to cut income taxes on Americans living abroad.

There will only be more as the debate heats up, and a key challenge for party leaders will be figuring out how to contain what could be mushrooming demands from their colleagues that would wreck their budget numbers.

Furthermore, the Politico reporter adds, "They’ll have to raise the debt limit too, after a last-minute bid by Trump to increase it before he comes into office, was rejected. And Republicans are promising to also cut mandatory spending by $2.5 trillion. If any of those things get bogged down, that could push off the tax debate even further."

Reprinted with permission from Alternet.

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