THE GOP TAX BILL; IT AIN'T POPULISM

In the 1970s the Wall Street Journal assigned me to cover the tax beat on Capitol Hill. It was a great promotion but thought it would be pretty dull.

Wow was that wrong. The tax code is more than about depreciation or expensing. It's about who gets what and what that says about the priorities and values of the tax writers.
The just passed House bill is a good illustration. Overall with huge cuts in programs like Medicaid the bill is regressive as the tax provisions are heavily skewed to the affluent. Republican defenders say this is about extending 2017 tax cuts that reward the more productive elements.
I don't accept that. But a look at the optional tax measures adopted underscores their distorted values:
-- Start with Private equity versus University endowments. Recall the talk from Donald Trump and some congressional Republicans about closing the carried interest loophole that allows some private equity and hedge fund executives to pay a lower tax rate.
However, instead of eliminating this loophole House Republicans handed these rich executives new breaks with a more generous provision for debt. "The 2017 bill actually restricted interest deductions private equity executives could take, but this the current bill reversed that. It's a huge giveaway to them," says Chuck Marr, the tax expert at the liberal Center for Budget and Policy Priorities.

To raise revenue to pay for some of these tax cuts, Republicans stuck it to the endowments of wealthier Universities like Harvard, Princeton, Yale, MIT and Stanford as well as a few smaller schools like Grinnell College. The tax on income from these endowments was raised from 1.4% to a maximum of 21%.
Whatever the good feelings of going after the "woke" and the "elites," studies show the impact will fall heaviest on reduced aid for students from working and middle class
The bottom line: wealthy private equity types would get even richer while middle class kids will lose opportunities.

-- The Estate tax vs the Child tax credit. After dramatic Republican-led cuts, the estate tax is only paid almost exclusively by the super rich, fewer than 1/10th of 1% of all estates. It was reduced even further in the House bill. By next year couples will be able to deduct $30 million, in addition to any charitable contributions, before the estate owes any tax.

"The Republicans have now made the estate tax so small they could drown it in a bathtub," says Michael Graetz a a Columbia University Law school professor, a top tax official in the George H.W. Bush Administration and author of a recent book, "The Power to destroy --How the antitax movement Hijacked America."
The House bill gets credit for lifting the child tax credit to $2500. This goes to families making up to $400,000. Left out of the full benefit are more than 10 million kids, including 688,000 children of veterans, whose families don't make enough to get the maximum $2500.

Jayson Smith, the chairman of the House Ways and Means committee sponsored a measure last year that would have given these children, who need it, the full $2500, not a lesser amount. He forgot about this in the current bill.
-- The pass-through provisions versus the premium tax credit. The so-called pass through provision allows a lower tax rate for qualified entities like partnerships, real estate operators, car dealers and even some private equity officials. More than half the benefits go to owners with annual incomes of over $1 million.

Conversely, the Republicans hate the Affordable Health Care Act --which politically they can't kill - so they try to chip away. In this bill they eliminated most of the Premium tax credit which is used to help buy health insurance for working class families. This could cause 4 million Americans to lose health insurance.

--Tax audits for the rich versus for those for poorer taxpayers. Trump has decimated IRS enforcement, laying off as many as a quarter of all auditors These mainly were government employes who brought in lots of money from tax avoiding wealthier Americans.
"This is going cost the government $ 1trillion over the next decade," predicts former Treasury Secretary Larry Summers.
But these self-styled fiscal watchdogs have set up a special audit system to detect deception for the Earned Income Tax Credit which goes largely to the working poor.
Ignore the populist rhetoric; this bill shows the Republicans remain a party of the affluent.