Editorial: GOP tax plans have become — in a word — monstrous

Late support from Sen. John McCain, R-Arizona, and Sen. Susan Collins, R-Maine, among others, for a $1.4 trillion tax-cut plan paved the way for Senate Republicans to pass their bill 51-49 late Friday night and look to reconcile it with one the House approved Nov. 16. Eager for a legislative victory, President Donald Trump will sign anything sent to him that can be called a big tax cut. But this would be far from a victory for America, for the GOP plans amount to a multilevel disaster.

The San Diego Union-Tribune Editorial Board was heartened by Treasury Secretary Steve Mnuchin’s comments about tax reform earlier this year because they identified the tax code’s key flaw: its many provisions that reward special interests or disincentivize businesses from pursuing expansion and job creation. A simpler corporate tax code could generate as much revenue with significantly lower rates from day one and could generate more revenue in the long term because of economic expansion.

In some ways, the plans that congressional Republicans have embraced — including a reduction in the corporate tax rate to 20 percent and thinning of corporate tax rules — contain such reforms. It’s partly why Wall Street reached record highs Thursday. But the worthiness of these elements doesn’t make the rest of the tax plan acceptable at all.

The most obvious shortcoming is the fact that by far the biggest beneficiaries of the tax cuts are America’s wealthiest people — the top 1 percent of taxpayers. Both the Senate and House plans would eliminate the alternative minimum income tax and lessen or eliminate the estate tax, resulting in half or more of total tax savings going to the very rich. The Senate plan would let the personal income tax cuts expire in 2026. According to the nonpartisan Tax Policy Center, this means half of Americans would pay more taxes in 2027 compared to now, while corporations and the very rich would continue to pay less.

This is utterly at odds with public opinion — and with Mnuchin’s and Trump’s promises that a tax overhaul wouldn’t be a love letter to the tycoon class. Instead, it’s the latest iteration of trickle-down economics — the discredited theory that the less taxes the rich pay, the better that life gets for everyone.

But the massive problems with the tax plans don’t stop there. On a macro level, nonpartisan analysts say either plan will balloon the national debt. On a micro level, some provisions seem specifically tailored to hurt perceived GOP foes, starting with provisions that reduce or eliminate the deductibility of local and state taxes, which are highest in blue states like California and New York. Just as troubling is what Republicans want to do to higher education and what might happen to health care in their rush to pass some kind of tax reform. Both the House and Senate plans would create new taxes on the largest private college endowments. The House plan would tax tuition waivers for graduate students and end deductions for student loan interest. Given America’s need for a well-educated workforce, the latter proposals are beyond the pale. The Senate plan would also end the Affordable Care Act’s key mandate — requiring individuals to have health insurance — without addressing the likely dire consequences of doing so.

Congress passing a Frankenstein’s monster of this legislation would be an awful end to one of the most dispiriting, dysfunctional years in modern political history. America needs a tax code whose core goal is promoting economic growth. The core goals of the GOP tax plan seem to be helping the rich get richer, giving the shiv to political enemies and injecting massive uncertainty into institutions like higher education and health care. On what planet is that reform?

Twitter: @sdutIdeas

Facebook: San Diego Union-Tribune Ideas & Opinion

UPDATES:

11:00 p.m. Friday: This editorial was updated upon passage of the Senate tax-cut plan to reflect the vote.