The rich are about to get a big tax cut.
Shortly after his nomination as Treasury Secretary was announced, Steven Mnuchin went on television to offer some tax-reform principles that would guide the new administration:
Any reductions we have in upper income taxes will be offset by less deductions so that there will be no absolute tax cut for the upper class. There will be a big tax cut for the middle class, but any tax cuts we have for the upper class will be offset by less deductions that pay for it.
This appears to be false, at least if Republicans follow through on their plan to repeal-and-delay the ACA. Although the bill that’s under discussion would only gut the ACA in 2019, it would immediately cut taxes on the very rich.
How big is the tax break? According to CBO, the reconciliation bill that Republicans are using as a template would cut taxes by $623 billion over ten years. Of that, $123 billion would come from the repeal of the Medicare tax surcharge and $223 billion from the repeal of the tax on investment income.
That $346 billion represents about $1,000 for every man, woman, and child in the United States. Every cent will go into the pockets of people making more than $200,000 per year—the “upper class” that Mnuchin says won’t be getting any tax cuts. To my knowledge, there has been no discussion of offsetting those cuts in the repeal-and-delay bill. Maybe offsets will come later, but you’ll forgive me for some skepticism.
Also, where does this leave Republicans when they look to finance their version of health reform? If the party remains steadfast in its anti-tax commitment, the only options are savage budgets cuts or deficit spending. Neither option is appealing, which will complicate negotiations over any “terrific” replacement.
Look, Republicans won the election. They can go ahead and cut taxes if they want. But they don’t get a freebie just because this particular cut is part of a health-care bill. Call repeal-and-delay what it is: a big tax cut for the wealthy coupled with a vague commitment to Republican-style health reform in a couple of years.