November, 13 2017, 02:00pm EDT
For Immediate Release
Contact:
Michelle Bazie,202-408-1080,bazie@cbpp.org
The House Republican Tax Plan Is Fiscally Irresponsible
The tax bill approved by the House Ways and Means Committee on November 9 is fiscally irresponsible. The bill would cost nearly $1.5 trillion over the decade, according to Joint Committee on Taxation (JCT) estimates. But provisions in the bill that would phase in slowly or expire after several years obscure the bill's true cost and would almost certainly drive the ultimate cost even higher.
WASHINGTON
The tax bill approved by the House Ways and Means Committee on November 9 is fiscally irresponsible. The bill would cost nearly $1.5 trillion over the decade, according to Joint Committee on Taxation (JCT) estimates. But provisions in the bill that would phase in slowly or expire after several years obscure the bill's true cost and would almost certainly drive the ultimate cost even higher.
Further, the costs would continue beyond the ten-year window shown in the official cost estimates, adding substantially to the nation's debt burden. A new analysis by Penn Wharton economists that also takes into account the bill's effects on the economy and the interest burden from higher debt levels estimates that it would add roughly $3 trillion to the debt between 2018 and 2037.
Current Fiscal Outlook Doesn't Support House Bill's Irresponsible Tax Cuts
Today's tax debates are taking place in a substantially different fiscal environment than when past tax cuts were debated. Compared to 1981, when the Reagan tax cuts were passed, and 2001, when the Bush tax cuts were enacted, revenues today are lower and the debt held by the public is considerably higher, measured as a percent of the economy. (See Figure 1.)
In 2001, the federal government was running a surplus, the federal debt was shrinking, and large surpluses were forecast for the coming decade. Today's fiscal outlook is the opposite.And the budget outlook is vastly different, particularly compared to when the 2001 Bush tax cuts were being considered.[1] In 2001, the federal government was running a surplus, the federal debt was shrinking, and large surpluses were forecast for the coming decade. Today's fiscal outlook is the opposite: deficits are growing and the debt is projected to rise from today's 77 percent of gross domestic product (GDP) to 91 percent in 2027, according to the Congressional Budget Office (CBO), due to rising health care and other costs associated with the retirement of baby boomers, as well as the significant ongoing costs of the Bush tax cuts. (See Figure 2.)
Despite these looming fiscal pressures, congressional Republican leaders have abandoned their earlier pledges to pursue revenue-neutral tax reform. Instead, they're aggressively advancing a costly tax cut. Together, the bill's revenue loss and associated debt service costs would add $1.7 trillion to deficits and debt between 2018 and 2027, and would bring the debt to 97 percent of GDP by 2027.
Bill's True Cost Is Higher Than Advertised
The bill's cost is almost certainly understated in these estimates, however, because two of its major provisions would sunset (i.e., end) in 2023, in order to artificially hold down the bill's cost so that it complies with the rules established in the fiscal year 2018 congressional budget resolution, which restrict the size of the tax cut in this bill to $1.5 trillion over ten years.[2] These two provisions are:
A new $300 non-refundable tax credit for non-child dependents. This provision helps protect many middle-income people from facing a tax increase due to other provisions in the bill, such as the elimination of the personal exemption. But under the bill, this provision is slated to expire in 2023. That's a major reason that the number of people facing tax increases would rise over time, according to the JCT estimates. In response, Chairman Brady and other Republican lawmakers have said explicitly that policymakers would come back and extend the provision before it expires[3] -- essentially acknowledging that the scheduled expiration of this tax credit in 2023 is a budget gimmick.
A generous deduction for business investments. The bill would let businesses deduct the cost of certain investments -- such as in factories and equipment-- in the year in which they're made, instead of following the current practice of deducting their cost over time as the factories and equipment wear out (i.e., as they "depreciate" or decline in value). This provision, known as "full expensing," would start immediately but then expire in 2023. With full expensing removed, businesses would pay more in tax than they would otherwise, as they couldn't deduct depreciation costs on investments they've already fully expensed. That's one of the main reasons that the JCT estimates show the bill's business provisions causing a tax increase on businesses in 2023.[4] Policymakers would very likely extend this provision, just as they have extended similar so-called "temporary" provisions that give businesses more generous deductions for investments in buildings and equipment.[5]
While there are no JCT estimates of the cost of extending these two provisions, the Committee for a Responsible Federal Budget estimates that continuing them after their expiration in 2023 would add roughly $400 billion to the cost of the bill over the decade.[6] These additional costs and the associated debt service would boost the debt-to-GDP ratio to 99 percent by 2027.
House Bill's Tax Cuts Would Have Substantial Long-Run Effects
The bill's cost will continue beyond 2027, adding to the nation's debt for years to come, a new analysis by economists at the University of Pennsylvania's Penn Wharton Budget Model finds.[7] The Bush tax cuts -- which were first enacted in 2001 and then mostly made permanent following the "fiscal cliff" debate at the end of 2012 -- provide an important lesson, as they represent a permanent loss of revenue that continues to add to the debt. (See box.) The cost of the Bush tax cuts, as amended, from 2001-2018 accounts for about one-third of the entire $15 trillion debt held by the public in 2018, we estimated in a 2013 study.[8]
Supporters of the House tax bill often claim that its positive effects on the economy will counter its large revenue losses, effectively removing any impact on the deficit. But the Penn Wharton estimates conclude otherwise. They estimate that the bill would increase the size of the economy above current projections by between 0.33 percent and 0.83 percent by 2027 -- meaning it would only add between 0.04 percent and 0.1 percent to economic growth each year, on average. Further, the Penn Wharton study concludes that "this small boost fades over time, due to rising debt. By 2040, GDP may even fall below current policy's GDP."[9] Even after taking the bill's growth effects into account, Penn Wharton finds it would add roughly $3 trillion to the debt in the next ten-year period (2028-2037) beyond the official budget window.
Other estimates, such as those by the Tax Foundation, show higher economic growth effects from the House bill than Penn Wharton.[10] But the Tax Foundation's estimating model relies on assumptions that are well outside the economic mainstream. [11] For instance, the Tax Foundation makes very aggressive assumptions about how certain tax changes affect decisions to work, save, and invest and thereby generates outsized estimates of the responses to various tax policy changes. It also ignores any impact of unpaid-for tax cuts on budget deficits and debt; in contrast, CBO and JCT assume, based on the empirical evidence, that higher deficits lead to a reduction in national savings and investment, ultimately lowering future economic output compared to what it otherwise would be. Yet even with these larger growth effects, the Tax Foundation still shows that the bill would fall far short of paying for itself, adding $1 trillion to deficits over the first ten years. (President Trump's Council of Economic Advisers also claims that a tax cut like the House bill would have large growth effects, particularly on workers' wages, but mainstream economists have sharply criticized those estimates as being highly implausible.[12])
Long-Run Effects of Tax Bills in the House and Senate
The tax bill is being considered under the special budget "reconciliation" process, but different rules apply to reconciliation bills in the House and Senate. In particular, certain rules, named after former Senator Robert Byrd, apply to Senate consideration of reconciliation bills.a
For example, while both houses have the same reconciliation instruction directing that the bill cannot cost more than $1.5 trillion over the 2018-2027 period, the two chambers face different requirements in the period after 2027. In the House, there are no restrictions on revenue losses after the ten-year window. But, in the Senate, one part of the Byrd rule prohibits an increase in the deficit in any year after 2027. Thus, the House bill as it now stands -- which has large revenue losses beyond the ten-year window, as the Penn Wharton analysis shows -- would violate the Senate's Byrd rule, which requires 60 votes to waive.
The Senate will need to take steps to address these out-year costs to avoid a Byrd-rule violation. The 2001 Bush tax cuts faced the same out-year problem, and policymakers chose to finesse it by sunsetting all of the provisions in the bill before the end of the ten-year window. That sunset, however, was an artificial constraint on the long-run cost of the Bush tax cuts. Policymakers subsequently continued the vast majority of the tax cuts on a permanent basis, rather than let them expire. When assessing the cost of any tax-cut bill that includes sunsets purely to comply with budget rules, history suggests that a much clearer picture of the bill's long-run effects requires assuming that policymakers will extend most or all the provisions beyond their sunset dates and likely make them permanent.
The Center on Budget and Policy Priorities is one of the nation's premier policy organizations working at the federal and state levels on fiscal policy and public programs that affect low- and moderate-income families and individuals.
LATEST NEWS
UNICEF Warns Area Israel Pushing Rafah Residents to Is 'Not Safe'
"It is a narrow strip of beach on the coast that lacks the basic infrastructure—like toilets and running water—needed to sustain the population," said the agency chief.
May 09, 2024
As Israel's tanks and warplanes continued attacking eastern Rafah on Thursday amid fears of a full-scale invasion, United Nations leaders warned that the area to which Israeli forces are directing Palestinians in the southern Gaza Strip city is unsafe.
The Israel Defense Forces this week has
circulated a map and claimed that "the IDF has expanded the humanitarian area in Al-Mawasi to accommodate the increased levels of aid flowing into Gaza. This expanded humanitarian area includes field hospitals, tents, and increased amounts of food, water, medication, and additional supplies."
However, in an interview published Wednesday, Tess Ingram of the United Nations Children's Fund (UNICEF)
said that "the area that they're being directed to evacuate to is not safe. It's not safe because there aren't the services there to meet their basic needs, water, toilets, shelter."
"But it's also not safe because we know that that area has been subject to strikes despite being a so-called safe zone. So we're really concerned about that impact of a ground offensive on one of the most densely populated areas in the world," she told The Intercept's Jeremy Scahill.
"Israel's latest evacuation orders and their ground operations will bring more death and displacement."
Rafah was home to about a quarter-million people before October 7, but since Israel launched what the International Court of Justice has
called a "plausibly" genocidal assault on Gaza—killing at least 34,904 Palestinians and wounding another 78,514 as of Thursday—the city's population has swelled to over 1.4 million.
UNICEF Executive Director Catherine Russell
said last week that a major military operation against the crowded city "would bring catastrophe on top of catastrophe" for the young people there, explaining that "nearly all of the some 600,000 children now crammed into Rafah are either injured, sick, malnourished, traumatized, or living with disabilities."
Noting that "many of them have been displaced multiple times already," Ingram, who recently returned from Gaza, similarly told Scahill that "they're exhausted, traumatized, sick, hungry, and their ability to safely evacuate is limited."
Despite warnings from humanitarian leaders and the U.S. government—which has continued to arm the IDF throughout the war—Israeli forces attacked Rafah this week and seized control of the border crossing with Egypt, further restricting aid delivery.
U.S. President Joe Biden previously called attacking Rafah a "red line." While criticizing the IDF assault on the city Wednesday, the American leader was accused of "moving the goal post" because he merely threatened to cut off arms if Israel pursued a major invasion, rather than stopping the flow of arms immediately.
Israeli Prime Minister Benjamin Netanyahu made clear on Thursday that he has no intention of backing down, saying in a video message in Hebrew that "if we are forced to stand alone, we will stand alone."
Russell said in a statement Thursday that "the intensification of military operations in the Rafah area and the closure of key border crossings into southern Gaza have severed our access to fuel, threatening to grind humanitarian operations to a halt."
According to the UNICEF chief:
If the Kerem Shalom and Rafah crossings are not reopened to fuel and humanitarian supplies, the consequences will be felt almost immediately: Life support services for premature babies will lose power; children and families will become dehydrated or consume dangerous water; sewage will overflow and spread disease further. Simply put, lost time will soon become lost lives.
I strongly urge the relevant authorities to provide humanitarian actors with actionable measures and concrete assurances to facilitate safe and secure movement of humanitarian cargo, via all routes, into and within the Gaza Strip.
"I am also deeply concerned about the movement of civilians in Gaza to unsafe areas," Russell continued. "In response to evacuation orders in eastern Rafah, at least 80,000 people have reportedly fled the area, with many seeking shelter in Al-Mawasi and among the ruins of Khan Younis. We have been warning for months that Al-Mawasi is not a safe option. It is a narrow strip of beach on the coast that lacks the basic infrastructure—like toilets and running water—needed to sustain the population."
Plus, as Scott Anderson, deputy director of the U.N. Relief and Works Agency for Palestine Refugees in the Near East, toldPolitico on Wednesday, "there's already 450,000 people in that general area. It is crowded."
Anderson also warned about dwindling supplies, saying that "we're down to no fuel. We're basically out. We've kept enough to meet the minimum security standards we have to meet for the U.N. so we can continue to stay here. But we're down to that level. Some hospitals will start shutting down their generators in three days if we don't get fuel in."
Martin Griffiths, the U.N. under-secretary-general for humanitarian affairs and emergency relief coordinator, stressed in a Thursday statement that "civilians must be protected and have their basic needs met, whether they move or stay."
While warning that "Israel's latest evacuation orders and their ground operations will bring more death and displacement," Griffiths also said that "we remain committed to providing aid to people, regardless of where they are."
"The decisions that are made today and their consequences in human suffering will be remembered by the generation that follows us," he concluded. "Let us be ready for their reproaches."
Keep ReadingShow Less
'Protest Works': Trinity College Dublin Agrees to Divest From Israeli Firms
Trinity's incoming student union president stressed that the school "refused to follow the U.S. example of bringing police in and made it clear that it would not pursue anything like that here."
May 09, 2024
Students at Trinity College Dublin in Ireland protesting the school's complicity in Israeli crimes in Palestine began dismantling their encampment Wednesday after administrators agreed to divest from three companies with ties to Israel's illegal settler colonies in the occupied West Bank.
TCD—which earlier this week
decried the "disproportionate response" to some pro-Palestine campus protests abroad—said an agreement between protesters and administrators had been reached on Wednesday afternoon, and that "plans are being put in place to return to normal university business for staff, students, and members of the public."
"We are glad that this agreement has been reached and are committed to further constructive engagement on the issues raised," senior dean Eoin O'Sullivan said. "We thank the students for their engagement."
Outgoing Trinity College Dublin Students' Union (TCDSU) president László Molnárfi called the agreement a "testament to grassroots student-staff power."
Incoming TCDSU president Jenny Maguire contrasted the situation at her school to the violent repression of student-led protests on some U.S. campuses.
"The college was determined that it would be an example going forward," Maguire said, according toThe New York Times. "It refused to follow the U.S. example of bringing police in and made it clear that it would not pursue anything like that here."
TCD's statement affirmed:
We fully understand the driving force behind the encampment on our campus and we are in solidarity with the students in our horror at what is happening in Gaza. We abhor and condemn all violence and war, including the atrocities of October 7th, the taking of hostages, and the continuing ferocious and disproportionate onslaught in Gaza. The humanitarian crisis in Gaza and the dehumanization of its people are obscene. We support the International Court of Justice's position that "Israel must take all measures within its power to prevent and punish the direct and public incitement to commit genocide in relation to members of the Palestinian group in the Gaza Strip."
"Trinity will endeavor to divest from investments in other Israeli companies," the school added, vowing to establish a task force on the issue.
"A real and lasting solution that respects the human rights of everyone needs to be found," the TCD statement said.
The protest camp—which was spearheaded by TCDSU and the Palestinian-led Boycott, Divestment, and Sanctions movement—was erected Friday night on Fellow's Square, at the heart of Ireland's oldest university. Students demanded that TCD sell off its investments in three Israeli companies included on a United Nations "blacklist" first published in 2020 for their links to human rights violations committed by Israel in the West Bank and East Jerusalem.
The TCD protest came amid Israel's 216-day assault on Gaza, which has left at least 124,000 Palestinians dead, maimed, or missing in what the International Court of Justice in January called a "plausibly" genocidal campaign. Support for Palestine runs strong and deep in Ireland, which, like Palestine, was also colonized by the British, and where many people see parallels between their historic repression and Israel's crimes against Palestinians.
TCD's campus—which is located in the center of the Irish capital—had been shut down for five days, a move that affected the school's income as it houses the Book of Kells, an ancient Celtic manuscript visitors pay from €16-€33.50 ($17-$36) to see. According toThe Irish Times, the Book of Kells generates approximately €350,000 ($377,000) in weekly income during the busy summer months.
Last week, the TCD fined TCDSU €214,000 ($231,000) for financial losses stemming from multiple protests held throughout this academic year.
Meanwhile in the United States—where a pair of Republican senators this week introduced legislation to brand students protesting for Palestine as "terrorists" and add them to the no-fly list—campus encampments continued to spread from coast to coast.
On Wednesday, progressive U.S. Congresswomen Rashida Tlaib (D-Mich.) and Cori Bush (D-Mo.) spoke alongside student protesters from George Washington University outside the U.S. Capitol.
https://t.co/MvLg0MMN90
— Congresswoman Cori Bush (@RepCori) May 8, 2024
"We will not stop in defending these students until [the] end in regards to the genocide... until there is an immediate and permanent cease-fire that includes complete withdrawal of Israeli forces from Gaza," said Tlaib, the only Palestinian American member of Congress. "We're proud to use our positions in office to bring these voices, so you all don't forget why there are encampments, why there are movements and dissent around this country."
While crackdowns and violence by police and Israel supporters have garnered most of the headlines in the U.S., at least eight schools across the country including California State University, Sacramento; Evergreen State College; University of California, Riverside; Brown University; Rutgers University; State University of New York, Purchase; Northwestern University; and University of Minnesota have agreed to some or all of students' demands.
After a week of demonstrations at a student-led encampment at California State University, Sacramento, administrators said they would revise the school's socially responsible investment policy and refrain from investments linked to Israeli human rights violations in Palestine.
"I think it's so significant what we did here because we're essentially raising the bar for all universities," Sacramento State sophomore Michael Lee-Chang toldThe Intercept. "We've had every single one of our demands met, and that's how it should be. We're here for Palestine, and student power shouldn't be underestimated. I can't state just how excited I am and can't wait to see how our win helps other campuses reach their victories too."
Faculty at U.S. colleges and universities have also been taking a more active role in the protests. Professors and other staff at the New School in New York City set up a solidarity camp on Wednesday, erecting tents with signs including "Faculty Against Genocide" and "Jews for Palestine."
As of Thursday, more than 800 Jewish professors had signed an open letter demanding that lawmakers and U.S. President Joe Biden oppose the so-called Antisemitism Awareness Act, House-approved legislation the educators warn will "amplify the real threats Jewish Americans already face" by "conflating antisemitism with legitimate criticism of Israel."
Keep ReadingShow Less
'Inexcusable': Amnesty Slams Biden Admin for Delaying Report on Israel's Use of US Weapons
"The Biden administration had months to put together a report on information they should already be collecting."
May 09, 2024
A leading human rights organization on Wednesday slammed the Biden administration's decision to indefinitely delay the release of a report on whether Israel and other U.S. allies are using American weaponry in compliance with international law.
"The Biden administration had months to put together a report on information they should already be collecting—whether grave human rights violations and other serious violations of international law are being committed using U.S.-provided weapons in seven conflicts around the world," said Amanda Klasing, national director for government relations at Amnesty International USA. "They must release it urgently."
"This is especially urgent," Klasing added, "given the Israeli military's ground operation in Rafah, in the occupied Gaza Strip, where more than 1.4 million Palestinians, including 600,000 children, are sheltering. Burying the head in the sand tactic doesn't make the violations of the government of Israel go away."
Required under a White House policy implemented in February, the report was supposed to be delivered to Congress on May 8.
U.S. State Department spokesman Matthew Miller said during a press briefing Wednesday that the administration will "have it up in the coming days," but declined to offer a specific timeline.
"It is overdue for President Biden to end U.S. complicity with the government of Israel's grave violations of international law."
U.S. President Joe Biden admitted in a CNN interview Wednesday that the Israeli military has killed civilians in Gaza with American-made bombs—something human rights organizations like Amnesty have been documenting for months.
In a research brief submitted to the Biden administration last week, Amnesty detailed three cases in which Israel's military has used U.S.-made weapons in violation of international law. In October, Israeli forces used Joint Direct Attack Munitions manufactured by Boeing to carry out airstrikes on two Gaza homes, killing 43 civilians—including 19 children and 14 women.
While applauding Biden's decision to halt a shipment of thousands of bombs to Israel as it attacks Rafah, Amnesty said Wednesday that it was "inexcusable" for the State Department to postpone the long-awaited report.
"It is overdue for President Biden to end U.S. complicity with the government of Israel's grave violations of international law," said Klasing. "Tough conversations with counterparts in Israel are tragically and clearly not doing the job—violations continue unabated, and civilians are paying the price with their lives."
It's unclear why the administration was unable to meet its own deadline for providing U.S. lawmakers with the report on Israel's use of American weaponry.
Kevin Martin, the president of Peace Action, argued in an op-ed for Common Dreams on Thursday that the delay "reflects internal divisions within the State Department not just about Israel's fallacious claim of compliance, but what to recommend to the executive branch in terms of possible action against Israel."
An internal State Department memo that leaked last month showed that officials at four of the department's bureaus did not believe the Israeli government's written assurances that its use of American weaponry in Gaza has followed international law.
Several State Department officials have resigned since October over the Biden administration's decision to arm Israel's assault on Gaza, which has killed more than 34,900 people and sparked an appalling humanitarian crisis.
Sarah Leah Whitson, executive director of Democracy for the Arab World Now, said Thursday that the Biden administration's "suspension of massive bombs to Israel is an important but long-overdue acknowledgment that Israel has been using American weapons to indiscriminately kill Palestinian civilians in violation of the most basic laws of war."
"Suspending all weapons transfers to Israel shouldn't be a political tactic," said Whitson, "but rather adhering to long-standing laws that prohibit arming abusers."
Keep ReadingShow Less
Most Popular