First, I thank Congressman Bill Flores for his Dec. 30 column detailing and defending how the recently passed tax-reform law “helps you.” His expertise as a CPA and a businessman is not in question. I appreciate the column’s intent, which was to provide real information to constituents in a public forum that allows us to read and to respond. That has not been the case in the telephone town halls or in his office policy to delete most critical comments to posts on his Facebook page about the tax plan. In the Waco Trib, then, we can have a dialogue.
Second, the tax cuts for the average American family — those whom he defines as making $73,000 for a family of four — will indeed be a help to many families. I appreciate greatly the concern for working families who, as he notes, have not been able to set aside more than $400 in many cases. As he says, “many of those individuals and families have experienced little to no growth in their take-home pay during the 2006-2016 time period. During that time, income inequality grew at the fastest rate in decades, while those families were left behind and saddled with higher health-care costs and higher costs of living.” Amen! Almost every single economist and working-class family would agree.
But that lack of cash reserves and the growing inequality of incomes is not mentioned in the rest of the article. Tax savings for working-class families will, the congressman notes, be used to help meet everyday living expenses, perhaps giving some measure of relief to those who live paycheck to paycheck. Nor does Congressman Flores mention that (1) inequality has been growing for a much longer period than the last 10 years, under Republican presidents as well as Democratic; (2) Republicans have resisted almost every single effort to raise the minimum wage; (3) the Affordable Care Act was one major effort to deal with higher health-care costs, along with the expansion of Medicaid, and we know what Flores and other Republicans have tried to do with that aid to many families (which comes in at much more than $1,600-$2,000 in tax savings under the new plan; and, finally, (4) these vaunted tax cuts for middle-class families will expire in about eight years. Then there’s the pesky statistic that the median household income in McLennan County is $42,687, a level at which tax savings will be lower because the incomes are significantly lower.
Thus, who really does Republican tax reform help in the long run? Answer: primarily people who do not work for hourly wages and people whose income comes more from investment than it does from salary or wages. What’s more, many of the tax cuts for these people do not expire at the end of 10 years, so that for many in those categories, their annual tax savings are far beyond the total annual wages or salary of that typical American family who makes $73,000. Current breaks for people who make their living off investments were maintained and in some cases expanded, such as “carried interest” on investments that is not taxed in the year it’s earned. That’s a break the average working family, especially those with less than $400 set aside, will never see.
Most constituents in this district, I’d wager, would love to see a second column by Congressman Flores on how tax reform helps those he does not mention, especially those making more than $400,000 a year. I suspect quite a few professional couples in McLennan County have combined salaries falling between that average $73,000 (or $77,000, the level at which the 22 percent tax rate kicks in) and $400,000 (the new top level for the 32 percent tax rate.) My wife and I are in that group. We probably could have, and should have, been asked to pay more. There are some new limits that he could mention in this second article, such as limiting mortgage interest deductions, but every single analysis I have seen, including those by such conservative sources as Forbes and the Wall Street Journal, will tell you that the people whom this tax-reform bill really helps are the “donor class,” i.e., those who can afford to give a lot of money in campaign contributions. These are the alternative facts — and in this case, they’re true.
There are multiple other issues with the way the column is framed. For instance, it is not universally accepted that tax reform and tax cuts simply generate higher growth. Look to Kansas for a catastrophic example. And tax reform that did generate higher growth, such as that under President Reagan (as the congressman accurately notes), came following a long bipartisan process. But then Reagan also raised taxes because of concerns about the deficit, which the GOP seems to conveniently forget. Congressman Flores tries to defend the tax-bill legislative process in November and December. Yet only Republicans insist this was not a rush job. And the House and Senate committees that crafted the bill did so in a process that was anything but bipartisan. In fact, the mystery and secrecy led to votes before many said they had a chance to read the whole bill, much less hold hearings on it. Consider Republican Sen. Bob Corker’s late vote switch and his supposedly learning still later last-minute additions meant real-estate investors such as him would get even bigger breaks: “I had not read it.”
Congressman Flores insists that claims this GOP tax-reform bill will negatively impact Medicaid, Medicare, Social Security and increased deficits are “categorically false.” If so, why did follow-up stories then report House Speaker Paul Ryan and others now want to reform those very programs, beginning by calling them the pejorative term of “welfare.” The higher deficits will put pressure on the budget reconciliation processes where there are already voices crying for cutbacks in those programs to pay for higher defense spending.
Flores cites a U.S. Department of Treasury report that says “our new 21st century tax code will generate reduced federal deficits of approximately $300 billion over the next 10 years.” Did the widely publicized $1.4 trillion deficit price tag for the reform (on top of current annual deficits) suddenly disappear? Congressman Flores did not say that the Treasury Department report released on Dec. 11 was one page long. Even the Business Insider called it “bizarre.” No economics student at the Baylor University School of Business would get by with that as an example of good work.
We should indeed celebrate the ways that the tax-reform law will help those to whom the article is addressed. The problem, as famous radio commentator Paul Harvey used to say, is “the rest of the story.” That bigger story is who the tax-reform act really helps. The much wiser course would have been to focus on a corporate tax reduction where there probably could have been some bipartisan consensus, evaluate its impact and then work later on income and investment taxes. It is indeed unfortunate when those of us who already have more than half the pie decide that we are entitled to even bigger portions.