Tax Bill Adds $1 Trillion to Deficit (Without Cutting Taxes for Most)

Nonpartisan analysis, from several places, shows the Senate tax bill will all $1 trillion to the deficit. What's next?

The stock market surged today on news that Senator John McCain would vote for the tax package. As it stands, however, the bill does not come close to passing budget rules.

Automatic tax hike triggers is one option if the bill does not bring in the anticipated revenue. And here's an advance hint: It won't. However, tax triggers may very well happen in the middle of the next economic downturn. And Republicans are loathe to pass tax hikes under any circumstances.

Deficit Fiasco

Senate Republicans’ $1.5 trillion tax cut would not “pay for itself” according to a report released on Thursday by the nonpartisan Joint Committee on Taxation. The report is a significant setback for Republicans, who have asserted that the tax cuts would grow the economy enough to cover the cost of the plan.

Plan Will Not Pay For Itself

Other Models

Senate Bill Estimates

House Bill Estimates

Tweet Deleted

It's truly a joke (and a bad one at that) for Republicans to announce the bill had passed when it hasn't.

The Hill reports the Tweet was deleted.

GOP Scrambles for Deficit Offset

• Republican Senators are considering raising some taxes down the road to help offset the deficit cost of their tax bill after the Senate parliamentarian rejected the idea of a trigger that would have automatically increased taxes if revenues failed to cover the cost of the cuts.

• The Joint Committee on Taxation said that economic growth from the tax cut will only offset $407 billion of the $1.5 trillion cost over the next decade. The analysis complicates the Republican argument that the tax bill will essentially pay for itself.

• Senators debated whether to send the bill back to Senate Finance Committee over concerns about the deficit impact, a move that would have halted the bill and possibly killed it. Republican senators ultimately all voted to proceed, setting the stage for a full vote at some point.

• Though Republicans sound optimistic, party leaders still do not have firm commitments from enough senators to ensure the bill will pass.

Tax Reform?

This bill does not reflect tax reform. It does not even lower taxes for most people.

And to address the budget concerns, Republicans are actually debating reinstating the alternative minimum tax, or A.M.T., on C-corporations and some high net worth individuals.

Senator Sue Collins may be the deciding vote.

“I want to see what the trigger is looking like. It’s gone through several iterations and it’s still under negotiation,” said Collins.

One Problem

"The Senate parliamentarian said the so-called trigger mechanism is not allowed in the bill."

And why should it be? Proposals to do something later amount to nothing. Sequester history proves just that.

A Reminder

The New York Times offers this reminder: "If the Senate passes its tax bill, it will need to reconcile the differences with the House version before a final bill can be sent to Mr. Trump."

Required Growth Will Not Happen

Bear in mind, not even 4% sustained growth (a 0.5% likelihood in my estimation) will allow for the bill pay for itself.

McConnell says an extra 0.4% will allow the bill to "pay for itself".

Here is more believable analysis:

Kent Smetters, a former economic adviser in President George W. Bush’s administration, who is now the faculty director of the Penn Wharton Budget Model at the University of Pennsylvania, calculates that the actual growth needed to offset the cut would be 0.57 percent a year, or 5.7 percent over a decade, under a conventional method of scoring tax plans (the so-called current policy baseline).

He explained in an email: “The 0.4 percent value was calculated using the current tax system, which has a larger tax base than the new tax system after the cut. Instead, to figure out how much growth is needed for the tax cut to pay for itself, you need to start with the new tax base and ask how much must it grow to avoid any additional deficit.”

Tax Trigger

Not only is the tax trigger against Senate rules, Republicans are lining up against a trigger if it is included.

“I think the trigger idea is idiotic,” said Representative Trent Franks, Republican of Arizona.

Middle Class Tax Hike

By 2027, only those making more than $100,000 a year gain from reform.

Hopefully this bill dies one way or another.

It may come down to Collins, Corker, or the Senate Parliamentarian to derail this mess.

By no perverted stretch of the imagination can one call this monstrosity "tax reform." I propose starting over.

Mike "Mish" Shedlock

"Deficit spending is plain and simply confiscation of wealth." Allen Greenspan, 1966.

"Required Growth Will Not Happen" Especially considering we are closing in on the next recession.

All of the Sturm und Drang about the Tax Bill is Kabuki theater, designed to draw attention away from the fact that neither the Republican or Democrat branch of the Washington Party have any intention, now or ever, to reduce Federal Spending to the levels required to support its constitutionally mandated functions and eliminate spending for those functions that are constitutionally forbidden. Anyone who pays the slightest attention to this farce is contributing to its survival. The entire bunch of political prostitutes should be removed from office. We need a reset.

Deficits don't matter, but you will have to resurrect Reagan to ask him, what he meant.

Who cares? Cheney was 100% correct: deficits don't matter. Not when you have the reserve currency, the largest military and nuclear arsenal in the history of the world to back it up, and colluding central banks putting the interests of the system over the interests of their respective people. The Dow will be 40,000 within 1-2 years. Just hold your nose and buy every single dip.

A huge margin call is enroute as margin borrowing is at record highs. Besides that, Katy Perry has been asking Warren Buffett about Bitcoin.
I ask you : can a top be all that far
away.??

Looks like “Automatic Triggers” is the latest scam promoted to get the indoctrinati to pump their fists with excitement: The GOP gives McCain a trillion-dollar toy army without a way to pay for it, except for “triggers” that supposedly raise taxes if the Dems win. Conversely the Dems and their next war on some make believe bogeyman, as well as sanity itself. Of course, the then reigning congress can cancel the whole trigger mess, because it’s, like, uh, mommy! I don’t want toooo!!! And my ventriloquist that has a credential says stimulate!!

Damn the Torpedoes! Full Speed Ahead!. Didn't Yellen voice some concern on ever expanding government debt to congress ? From 2003 to 2015 federal outlays increased 1 trillion smackeroo's. Why not a corresponding decrease in the cost of government ? http://www.taxpolicycenter.org/statistics/federal-receipt-and-outlay-summary

Federal Receipt and Outlay Summary

What margin calls? The stock market and bitcoin chase each other which will reach 30,000 first.

Off Topic:Next week could b very volatile for bitcoin since at the end of next week Sunday night Dec. 10 the futures market for bitcoin structured like the crude oil market, will begin trading on the CME which at some point add liquidity to the market. In anticipation of this event , there will be dramatic moves in both directions. At first I expected those with very deep pockets will move together to program their machines to hammer bitcoin down as much as 50%, but that’s what everybody thinks. So they may shove it way up to bring in new buying before the hammer takes it down a lot!

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