If a Democratic President is ever elected again, you know what is going to be a huge issue?

Filed in National by on December 2, 2017

…the national debt. It will be such a pressing issue that we’ll have to make huge cuts in social security and stop paying greedy teachers their lavish salaries.

4 winners and 3 losers in the Senate tax bill
Winner: corporations. Loser: charities.
Updated by Dylan Matthews@dylanmattdylan@vox.com Dec 2, 2017, 1:55am EST


Drew Angerer/Getty Images
The tax bill the Senate passed Friday is a sweeping piece of legislation, transforming the US health care sector, higher education, philanthropy, and, of course, the federal tax code. It’s a major policy change that creates big winners and big losers across the country, and even internationally — and fulfills a goal for Republicans who have struggled to pass their legislative agenda all year.

Here’s who winds up ahead, and who winds up behind.

Winner: Corporations of every shape and size
The cornerstone of the tax bill, the change that’s permanent and enduring and that even a future Democratic administration is unlikely to fully reverse, is its reduction of the corporate income tax rate from 35 percent to 20 percent.

This fulfills a longstanding demand of corporate executives and lobbyists, who complain that the statutory corporate tax rate charged in the US is higher than in peer countries; indeed, it’s the highest in the OECD grouping of rich developed nations. Our high rate, however, is offset by copious tax breaks and the ease with which the US allows companies to move profits to tax havens overseas, which means that the effective rate US corporations pay isn’t much different from that companies in other rich countries pay. The effective tax rate paid on profits from new investments in the US was about 24 percent in 2014.

A longstanding goal of both Democratic and Republican politicians has been to bring the statutory rate down from 35 percent by closing tax breaks in the corporate code. In theory, it should be possible to get the statutory rate closer to the 24 percent effective rate that way. The Obama administration had a plan for revenue-raising corporate tax reform with a tax rate of 28 percent, though it didn’t specify many tax breaks it wanted to close to pay for that.

Republicans in Congress and the Trump administration, by contrast, have opted for a 20 percent rate, lower than the effective rate, all but ensuring that overall taxes on corporations will be lowered. They also haven’t closed many tax breaks; they continue to let businesses deduct some of the interest they pay on loans, and don’t touch the large research and development tax credit, or the credit for low-income housing developers.

They make it easier for companies to move profits overseas by adopting a territorial system where profits earned abroad are taxed at a lower rate, and sometimes not taxed at all. They also offer a much lower rate for companies that decide to bring back profits currently parked overseas; this corporate tax “holiday” encourages future tax evasion by setting a precedent that evasion will be rewarded with special breaks to bring the money back.

And Republicans add a big new tax deduction for corporations by, for five years, letting companies deduct the full value of their investments. A lot of economists like this provision and think it’s good for growth. But it costs a substantial amount of money.

How do Republicans pay for all this? In the short-run, they don’t, and just add $1 trillion or more to the federal debt. In the long-run, they raise taxes on individuals and limit health care aid through ending Obamacare’s individual mandate. After ten years, the bill is basically a tax hike on individuals, particularly poorer individuals getting Medicaid or insurance subsidies, to pay for corporate cuts.


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Jason330 is a deep cover double agent working for the GOP. Don't tell anybody.

Comments (15)

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  1. Alby says:

    Yes. Bruce Bartlett pointed this out a while back. That’s the whole game — slash taxes, raise deficit, then claim deficit requires cutting social programs. They’ve been doing it for a while now and the press finally caught on.

  2. Liberal Elite says:

    Just wait and see what China decides to do with all of the dollars they’re sitting on… They must be pissed that we decided to print 1.5 trillion new dollars in an obvious attempt to erode their holdings.

  3. Alby says:

    Yes, that was the only reason for it. You have no idea what you’re talking about.

  4. Liberal Elite says:

    I never said it was the only reason. But running up the deficit will be a tax on cash holdings, and China has more of that than anyone.

    In fact, short selling the dollar, might be a good move for anyone (i.e. take out large fixed rate mortgages and invest).

  5. Alby says:

    No, the US government has more of that than anyone. Also, the debt will go up a trillion dollars over ten years by the GOP estimates (probably double that in actuality, if the Democrats can’t undo this sooner).

    It only works as you state if inflation takes off. As hard as they’ve tried, the GOP and its allies haven’t been able to make that happen for years now. If they can actually achieve 3% annual growth for more than a few months (highly doubtful) they might finally kick it into gear, but I doubt that’s what those holding the debts want.

    You state this as if an economy were an easy thing to steer accurately. They print money for lots of reasons, and this one is far down the list. At the top is the fact that corporations and rich individuals are hoarding cash because they can’t find anyplace to invest it that meets their standards for return.

  6. Alby says:

    China holds about 5% of the national debt. Japan holds slightly more.


  7. Liberal Elite says:

    @A “China holds about 5% of the national debt. Japan holds slightly more.”

    You obviously didn’t bother to read your own link.
    It says that China holds the most US debt as of 2017.

    But the bottom line is that when you print new dollars, there is no net increase in inherent value. The inherent value in the new dollars all comes from old dollars.

    And so, running up the deficit can be viewed as an attack on existing dollars, and most of those are foreign held. And as a result, we’re now encouraging foreign investors to dump dollars. And if they do that, expect some pain aimed at the lower and middle classes here in the US.

  8. Tom Kline says:

    Obama DOUBLED the national debt. Social programs must be cut. Move to Europe if you want freebies.

  9. jason330 says:

    Says the old guy soaking up freebies.

  10. Delawarelefty says:

    Yeah Tom, that Obama debt was caused by the Bush/ Retug tax cuts and the Bush/ Rethug recession. Your memory seems to be failing you.

  11. puck says:

    …and the bipartisan war on iraq.

  12. Alby says:

    “And so, running up the deficit can be viewed as an attack on existing dollars, and most of those are foreign held. ”

    No, they are not. Read the link again. The total debt is about $20 trillion. Each of the largest foreign holders has about $1.1 trillion each.

    “And so, running up the deficit can be viewed as an attack on existing dollars, ”

    Yes, it can, if you’re the kind of crank who listens to Glenn Beck. Buy gold if that’s your thing.

  13. Alby says:

    “Obama DOUBLED the national debt. ”

    It’s a little misleading to hold Obama (or any other president) accountable for the deficit incurred during his first year of office. That’s because the previous administration already set the federal budget for that fiscal year.

    Before Obama took office, President Bush’s last budget (FY 2009) created a deficit of $1.16 trillion. That fiscal year began on October 1, 2008, and continued until September 30, 2009. That means most of that deficit occurred after Obama took office in January. But since it wasn’t his budget, it’s not accurate to attribute it to him.

    FY 2009 – Even though the budget had been approved, Congress added emergency funding to stop the Great Recession. It added the first year’s worth of spending from Obama’s Economic Stimulus Act to the FY 2009 budget. That $253 billion accrues to Obama.
    FY 2010 – Obama’s first budget created a $1.294 trillion deficit.
    FY 2011 – This budget contributed $1.3 trillion to the debt.
    FY 2012 – The deficit was $1.087 trillion.
    FY 2013 – This was the first Obama budget where the deficit, $679 billion, was less than $1 trillion. Thank sequestration, which forced a 10 percent cut in spending.
    FY 2014 – The deficit was $485 billion.
    FY 2015 – The deficit fell further, to $438 billion.
    FY 2016 – The deficit is expected to be $600 billion
    FY 2017 – The deficit is projected to be $441 billion.
    When the deficits from all these budgets are added together, President Obama increased the debt by $6.576 trillion.

    Shut the fuck up until you know what you’re talking about.

  14. Liberal Elite says:

    @A “Yes, it can, if you’re the kind of crank who listens to Glenn Beck. Buy gold if that’s your thing.”

    Ha! Don’t you know that Glenn Beck was selling fake gold coins??

    No. I’d rather short sell dollars. In fact, that exactly what I’m doing.

  15. Alby says:

    No, I never knew that. Beyond that, whatever floats your boat. Good luck.