My biggest beef with the GOP tax plan …

… and still, nobody seems to be talking about it.


Now that the tax reform package is in the books, I should be elated, right?

But, I’m quite ambivalent.

On the plus side, I do think that the stock market will stay el fuego.

Selfishly speaking, that dwarfs all of the negatives.

But …

  1. Based on my calcs, I’m in the 20% of folks whose taxes are going up, not down.  I’m thinking that I may be the only person who doesn’t reside in CA, NY and NJ whose taxes are going up. Ouch.
  2. Carried interest is alive and well.  C’mon Donald, you promised. And please, don’t tell me that hedge funds and private equity are engines of growth.  May be small potatoes re: tax revenue, but it’s what Rudy Giuliani would call a “broken window”.
  3. Are Google and Facebook really going to invest their tax savings here in the USA? I’m betting the under on that one. Wish the corporate tax benefits were tied more directly to employment levels.

And. my biggest concern is the long-run tilt in voting dynamics.  Tax cuts will no longer have any campaign whallop.


Remember Mitt Romneys ill-timed observation about “47% of Americans”.

No, they weren’t deplorables, they were simply the folks who pay no Federal income taxes.

Well if the GOP tax plan goes through, the 47% will be be alive .. and well … and growing.


Let’s start with some data…


Romney was right on the facts … back in 2012, 46.6% of “tax units” (think: people) paid no Federal income taxes … or paid negative Federal income taxes (i.e. got a check in the mail for “refundable credits”).

The improved economy has driven that number down to under 45%.

When accosted for favoring the rich, a frequent GOP retort is that “the proposed plan increases the number of Americans who will pay no Federal income taxes. Source

It’s estimated that an additional 6 million tax filers will no longer have to pay any Federal income taxes. Source

That pushes the percentage of folks not paying Federal income taxes up to close to 48% … 47.8 to be precise.

And, the trend will push that number perilously close to the magic 50% majority mark … when folks (think: VOTERS) who pay no income taxes outnumber those who do.

Why is that a big deal?

The Tax Foundation — a nonpartisan tax research group – has repeatedly warned:

“While some may applaud the fact that millions of low- and middle-income families pay no income taxes, there is a threat to the fabric of our democracy when so many Americans are not only disconnected from the costs of government but are net consumers of government benefits.

The conditions are ripe for social conflict if these voters begin to demand more government benefits because they know others will bear the costs.”

English translation: Things are more rational when everybody has some skin in the game.

And, as Mitt intimated: More stuff is a no-brainer if somebody else is paying for it.


P.S. Left-leanesr like to argue: “Yeah, they might not pay Federal income taxes but they pay payroll taxes – Social Security and Medicare.”

Beside the point that those are insurance programs and the payroll taxes are, in effect, premiums being paid …. note the last line on the data table above:

Almost 60% who pay no Federal income taxes (26.8% / 44.3% =  60.1%) get more than enough in refundable tax credits (i.e. checks in the mail from the IRS) to more than offset any payroll taxes withheld.


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One Response to “My biggest beef with the GOP tax plan …”

  1. Neel Master Says:

    Prof Homa, I think lefties argue that the poor pay sales tax and other regressive taxes and fund government in that way.

    How much tax do you think a 40hr/week earner at minwage should pay? (Annual salary: $15,000.)

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