The most notable thing about the House plan is that it doesn’t include the very modest tax increase on income above $2.5 million, from 37 percent to 39.6 percent, that’s recently been bandied about. Trump has danced around the idea of a millionaire tax, first telling Time’s Eric Cortellessa that “I actually love the concept but I don’t want it to be used against me politically,” then saying “It would be very disruptive, because a lot of the millionaires would leave the country” (no they wouldn’t, but never mind), then finally saying “Republicans should probably not do it, but I’m OK if they do!!!” The through line is I want everyone to think I’m for higher taxes on the rich but for the love of God don’t do it.
Even more skewed, ITEP found, was a provision in the 2017 bill that gave a 20 percent deduction on “pass through” income; that is, income from a small business. Small businesses tend to receive favorable tax treatment because of what former TNR editor Michael Kinsley has called an anthropomorphic fallacy that small businesses are “owned by small people.” In fact, 92 percent of this benefit goes to the top 20 percent in the income distribution and 55 percent (i.e., most of it) goes to the top one percent. Half of the benefit goes to millionaires.
I noted last summer that exempting tips from taxable income would have little effect because tipped workers don’t pay much income tax in the first place. Thirty-seven percent of them earned sufficiently low incomes that they paid no income tax at all. The Joint Committee on Taxation confirms this by estimating that the lost revenue would only be about $40 billion over the next decade. Partly that’s because the tax break would expire after four years, when you-know-who will be out of office. But it’s also because tipped workers seldom earn enough income to pay very much in taxes. As expected, the tax holiday does not apply to the overwhelmingly regressive payroll tax that all workers pay. To most people, the income tax is virtually indistinguishable from the payroll tax; you typically have to earn about $200,000 to pay more in income tax than in FICA tax. Under the House plan, an existing FICA tax credit for tips would be extended for the first time to beauty parlors—but that tax credit is for employers, not employees.
Trump also promised to exclude Social Security benefits from taxation, even though the median net worth for people aged 65 to 74 is more than twice that for the general population. People aged 70 and over own about one-third of the nation’s total wealth—and Baby Boomers like me, the youngest of whom are 51, own 52 percent. Hurray!
Trump’s Social Security tax holiday was too expensive for the House to consider, so instead it expanded by $4000 an existing over-65 tax deduction of $29,200 for married couples filing jointly and $14,600 for single people. None of which we over-65s particularly deserve. But the expansion is only for four years and it’s unavailable to couples earning $150,000 or more and single seniors earning $75,000. That keeps its cost down to $72 billion.
In sum: If you’re working class, this tax bill has very little for you and quite a lot for people much richer than you. Think of it as a studded collar for your next visit to the dungeon, you naughty things. But I recommend, instead, that you recite your safe word, because, really, haven’t you had enough of this bullshit?
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