Tax Reform (The Magnificat in Reverse)

He has brought down the powerful 

from their thrones, 

and lifted up the lowly; 

he has filled the hungry with good things, 

and sent the rich away empty.

Luke 1:52-53

The new congressional tax bill is not tax reform. It is just tax cutting. And it is not just cutting taxes; it is distributing the overwhelming majority of those cuts to the wealthiest among us.

And it is not just at all.

The wealthiest 1% of all Americans already control substantially more than the bottom 90%. Under the new tax bill that top group will gain a little bit more.

This is the Magnificat in reverse. The rich are filled with good things and the poor are sent away empty.

Of course the theory-- and we should be clear that this is a political theory without any economic evidence to back it up-- is that if the wealthiest people have more money they will invest it in enterprises that will benefit everyone. Right now the wealthiest individuals and corporations are sitting on a lot of capital. The theory is that if they had more capital they would create jobs and raise wages.

This has not worked in the past, but (apparently) hope springs eternal.

For at least four decades the American economy has been devoted to a massive redistribution of income from the bottom to the top. The gap between the richest Americans and the poorest Americans has been growing, and the middle class has been shrinking.

And let’s be clear. This gap has widened under both Republican and Democratic presidents. There have been different rates of increase but there have been no great reversals.

President Obama made income inequality a major policy priority. He was able to reverse the Bush tax cuts for the wealthiest Americans while maintaining those cuts for the middle class, and he was able to expand healthcare for middle and low income families. But those modest policy changes were more than offset by the massive gains in pretax income that went to the wealthiest Americans as the economy recovered from the crash of 2008.

The new tax bill will deal a possibly fatal blow to the Affordable Care Act. By repealing the individual mandate, the bill will result in 13 million more Americans without health insurance. That number could rise if the increase in premiums caused by the repeal of the individual mandate causes premium costs to rise dramatically. We know that premiums will go up. We don’t know how much they will go up. 

This is not unintended. 

In a celebratory gathering on the White House lawn, Mr. Trump deviated from his prepared remarks to offer a candid assessment: “I shouldn’t say this, but we essentially repealed Obamacare.”

As Dana Milbank reported in the Washington Post:

“Trump, in a Cabinet meeting earlier Wednesday, let his fleeting encounter with honesty get the better of him when he read aloud the stage directions that called for Republicans not to advertise that they were killing Obamacare. ‘Obamacare has been repealed in this bill. We didn’t want to bring it up,’ he said. ‘I told people specifically, "'Be quiet with the fake-news media because I don’t want them talking too much about it.”’ Because I didn’t know how people would —.’ Trump didn’t finish that thought, but he said he could admit what had been done ‘now that it’s approved.’”

Unfortunately, the Affordable Care Act may not be the only casualty.

When the deficit increases, and we know it will, lawmakers will be “forced” to “reform entitlements.”  By “entitlements,” they mean Social Security and Medicare. And by “reform,” they mean cut.

So the rich will have their taxes cut and the poor and the middle class will have their Social Security and Medicare cut. 

Merry Christmas.