The $500 billion word–tax reform political games begin

September 29, 2017 - Posted by: admin - In category:

taxes - No Responses

Can one word make that much difference? Yes, in the context of tax reform and the forecasted economic effect of the same, one word might equate to a difference of $500 billion.

First, concerning the picture which accompanies this post, please take it with the intended humor with which it is used. Regardless of my personal views of Mr. Trump one way or another (and my general respect for the office of President of the United States), I enjoy a little humor now and then and especially on a Friday.  Thus, no one need take offense by the humor intended in the picture, regardless of political leanings.

Second, with the excitement of the recent tax reform announcements, perhaps it did not immediately occur to us that we should adopt a healthy measure of skepticism about what lies ahead on the road towards actual enactment and adoption of such tax reform legislation.  Some have suggested that the administration tried to tackle reform of Obamacare first because it was viewed as an easier and less controversial topic. Wait, you may be thinking, healthcare seen as an “easy” and less controversial subject? Yes–all things are relative and in relation to tax reform, health care is in many ways a less sensitive and less complex item.  Afterall, the divide between Republicans and Democrats has not historically been that of healthcare–speaking historically and looking at decades and decades of history.  Rather, healthcare is a more recent issue and therefore while it is certainly a serious one that has vast ripples throughout our country and our economy, the divide and debate over health care simply do not run as long or as deep as that relating to taxes.

For as long as there have been Democrats and Republicans, there has been a polarized divide between the parties on the topic of taxes.  We are all familiar with such extreme views in this area.  One party believes and has historically preached that the wealthy should be highly taxed (see 91% top tax rate under JFK) and such high taxes should be used to pay for large government and many entitlement programs. The other party has long espoused cutting taxes for the higher income earners, with the rationale of “trickle down economics,” job creation and sustained economic growth as a result.  In short, tax reform is not a new battleground for the two major parties. It will remain a battleground in this recent turn of events.

This morning, NBC News published an online article about how the Republicans are reporting the projected economic effect of the proposed tax reform measures and how such things could play out in relation to our national deficit.  You can read that article at

The Trump administration and the Republican Congressional leaders who are proponents of these latest tax reform proposals are allegedly seeking to change the standard Congress utilizes to quantify the effect of legislation from the starting point of “current law” to “current policy.”  Note the difference of just one word “law” to “policy.”  No big deal, right? Well, according to the report, it is quite a big deal, one that could make the difference of half a trillion dollars with regard to the nation’s deficit and therefore, eventually, our economy.

Critics, including Rep. Richard Neal of Massachusetts, the top Democrat on the tax-writing Ways and Means Committee, said it’s a sleight of hand designed to fool the public.

“Too many times there’s an effort made to confuse the issue by inventing a new set of numbers,” he said in a brief interview.

Budget experts across the political spectrum agree that switching baselines would lower projected government revenue by about $460 billion over the next decade — and perhaps more than $500 billion if interest is factored in — as the non-partisan Committee for a Responsible Federal Budget calculated last month.

“It could be a lot of money,” said Rep. John Yarmuth of Kentucky, the top Democrat on the House Budget Committee. “If you are able to pick your baseline, that’s not what would be the most honest type of budgeting.”

Of course, there are always two sides to every story (at least two sides), and we should be objective and fair enough to remember this as we review this story and the “facts” being reported in the NBC story.

Many Republicans believe that congressional budget-keeping rules make tax cuts look more expensive than they are. For years, they’ve argued that Washington bean-counters should use “dynamic” scoring rather than “static” scoring to account for new revenue coming into the Treasury from economic growth. Now, as the raw expense of Trump’s tax plan reaches into the trillions of dollars, they’d also like to use the “current policy” baseline to shrink the deficit number attached to their plan.

It’s not clear whether House Speaker Paul Ryan, R-Wis., and Senate Majority Leader Mitch McConnell, R-Ky., will try to change the bookkeeping method in legislation, but the concept has taken hold as a talking point among rank-and-file members of the GOP.

Let us remember that this is just one story, one perspective among a great many. There are a GREATmany details about this latest tax reform effort and legislation which will follow that we just do not have at present. What can look very ominous at one moment can, with more facts and other circumstances, eventually prove to be not much of an issue. Regardless, we know that this is just the beginning of what promises to be a very busy process.  There will almost certainly be a great many forks in the road and course changes before we (and they) arrive at the final destination.

If anybody thinks that tax reform is going to happen quickly, easily and without a whole lot of compromise, that person should be prepared for a rude awakening. In the interim, we would do well to continue to read the news (as reported from many different sources, angles, and political leanings) and pay close attention to how these events unfold.  Remember that there are very few if any, “objective” reports coming out of Washington. Such lack of objectivity would seem to be even more pronounced in the context of tax reform legislation.

Get comfy, perhaps grab some popcorn–this should be an interesting story to follow.

Leave a Reply