SUMMARY: The deadline for filing your taxes is right around the corner, on Monday, April 15. This is the first year that fully incorporates major updates to the tax code signed into law by President Trump in 2017. Amid the changes, some taxpayers are expressing confusion and alarm at how the new rules affect them. Lisa Desjardins talks to Jim Tankersley from The New York Times.
The Line: The top 1 percent will get 83 percent of the tax cuts under the new tax law.
The Party: Democratic
The Republican tax plan was signed into law just last month, and Democrats already have a well-worn, and misleading, talking point about it: 83 percent of the tax cuts go to the wealthiest 1 percent. That’s true for 2027 but only because most of the individual income tax changes expire by then.
In 2025 — the last year before those tax changes expire — a quarter of the tax cuts go to the top 1 percent.
It’s a classic case of politicians using a technically accurate statistic but without the context or explanation it requires. Without all the facts, the talking point leaves a misleading impression.
Democratic Sen. Sherrod Brown of Ohio used a version of the tax line in a Jan. 23 press availability, saying that “more than 80 percent of that tax cut went to the — goes to the wealthiest 1 percent." But he’s part of a long list of Democrats who favor the phrase.
House Minority Leader Nancy Pelosi repeatedly has said that “83 percent of the benefits go to the top 1 percent." It’s a line included in Senate press releases and emphasized three times in one Democratic press availability in late December, by Senate Minority Leader Chuck Schumer (twice) and Sen. Bernie Sanders, who did note that this was “at the end of 10 years” and that the “middle class” tax breaks “expire at the end of eight years.”
The important missing context is that the final tax legislation, which President Donald Trump signed into law Dec. 22, allows most of its individual income tax provisions to expire by 2027, making the tax benefit distribution more lopsided for the top 1 percent than in earlier years.
In 2018, according to an analysis by the Tax Policy Center, the top 1 percent of income earners would glean 20.5 percent of the tax cut benefits — a sizable chunk, but far less than the figure that’s preferred by Democrats. And in 2025, that percentage would be 25.3 percent, with the top 1 percent (those earning above $837,800) getting an average tax cut of $61,090.
Just two years later, in 2027, the percentage of tax benefits to this income group jumps to 82.8 percent, “because almost all individual income tax provisions would sunset after 2025,” explains TPC. The top 1 percent still benefits from some of the remaining tax cuts, such as reducing the top corporate tax rate from 35 percent to 21 percent. But their average tax cut drops by nearly two-thirds to $20,660 in 2027.
So while a lot more of the benefits go to the top 1 percent that year, there are fewer benefits to go around. Without those individual income tax provisions, all taxpayers see an average $160 tax cut in 2027, while the average tax cut for all taxpayers in 2025 is $1,570.
Why do these individual tax cuts expire in the law? Republicans say they expect a future Congress will extend those cuts, rather than allowing taxes for many to increase. But in order to pass their tax bill through budget reconciliation, a process requiring only a majority vote in the Senate, Republican lawmakers could not add more than $1.5 trillion to the deficit over 10 years. Nor could they have a bill that added to the deficit beyond that 10-year window.
The Committee for a Responsible Federal Budget calls the expiring cuts “gimmicks." It notes that “the ‘easy’ options” for Republicans to make the final bill meet those requirements were to have some of the tax cuts expire — and that’s what GOP lawmakers did. While the final bill costs an estimated $1.46 trillion over 10 years, CRFB says the actual cost could end up being $2.2 trillion, when these sunsetting tax cuts are actually extended.
One might argue the Republicans practically wrote this talking point themselves by constructing the legislation this way. The Tax Policy Center and other groups that analyze such legislation had to provide the relevant figures for 2027.
“The effect of turning off those individual income tax cuts would be dramatic,” TPC senior fellow Howard Gleckman wrote. “Households making less than $155,000 in 2027 would get no tax cut at all, on average. And more than half of all households would pay more in taxes than under the pre-TCJA, mostly because the new law permanently shifts to a less generous method for indexing the tax code for inflation. As a result, nearly 83 percent of all the benefits of the TCJA in 2027 would go to the top 1 percent of households.”
A spokesperson for the Democratic minority on the Senate Finance Committee told us that this statistic is “a key data point to our argument that Republicans’ tax law is an economic double standard. … The fact is, Republicans chose to make permanent massive tax cuts for multinational corporations while writing tax cuts for middle class families in disappearing ink.”
But Democrats are giving voters a misleading view of the new law’s impact. The proportion of tax benefits going to the top 1 percent is much lower in earlier years — before the individual tax cuts expire — than this talking point reveals.
SUMMARY: Syndicated columnist Mark Shields and New York Times columnist David Brooks joins Judy Woodruff to analyze the week’s news, including the priorities Republicans are putting forward in their tax overhaul bill, Democrat Doug Jones’ Senate upset in Alabama and what it means for Republicans in elections to come.
Judy Woodruff (NewsHour): And now to the analysis of Shields and Brooks. That is syndicated columnist Mark Shields, and New York Times columnist David Brooks.
Welcome, gentlemen.
I guess it’s now all over but the shouting, Mark. The Republicans seem to have the votes on this tax bill. What do you make of it?
Mark Shields, syndicated columnist: Well, Judy, the legendary late conservative columnist Robert Novak was an old friend and a constant frequent debating said the Republican Party stated seriously and approvingly that the Republican Party is put on earth for one reason, that’s to cut taxes, and I think they’ve lived up to the Novak mandate today. I mean, that’s it. I mean, that’s all it’s about.
I mean, think about this — cut the effective corporate tax rate by 46 percent, to 21 percent from 35. And at the same time, 8.9 million American children who get coverage, medical coverage under the children’s health insurance plan go unfunded since September 30th because they can’t somehow, in their feverish pursuit of lowering the top tax rate from 39.6 percent down to 37 percent so Steve Schwarzman can somehow have an easier Christmas, they can’t find the money. These are working poor families who make too much to qualify for Medicaid and not enough to buy their own health insurance.
It is the caricature of the enforcement of the ugliest stereotype of the Republicans as an uncaring party passing a bill that was written by and for the richest and most powerful.
Judy Woodruff: David?
David Brooks, New York Times: I’ll dial it back a few notches when you get to my position. But, you know, I’m not against corporate tax cuts. You know, Barack Obama once proposed cutting the corporate tax rate to 28 percent. So, we got 21 percent, so seven percentage points lower. That doesn’t strike me as a great moral difference. I think cutting the corporate tax rate as Sweden and all these other countries have done is good for the economy and makes us competitive around the world. It follows an international trend of people doing this.
But to me, you’ve got to surround it with other things to help the people that Mark is talking about. And that’s what the Republicans didn’t do, cutting the marginal rates, bad idea. They didn't even simplify rates.
And so, what strikes me is how irrelevant — I went to work at the Wall Street Journal editorial page in 1986. We’ve been talking about — Republicans have been talking about tax reform ever since that last tax reform. And all these ideas have been floated around. Some of them are — reduce the number of rates, of brackets, make a flat tax.
This bill has nothing to do with any of that work. This bill has nothing to do with all the intellectual work that real economists put in who are Republican, who are conservative, who have a vision of improving incentives. What’s big about this is that the Republican Party has become detached from the Republican economic profession. And so, they pass a bill simply as donor maintenance and it’s about hurting their people and helping our people without really an underlying economic philosophy at all.
So, they took an opportunity to do something pretty good, and they have a few good morsels in there, and they ended up doing something pretty bad that will hurt the worst and without helping growth.
Judy Woodruff: Will they at least help themselves politically, Mark?
Mark Shields: No, they won’t. Judy, I mean, it starts with 45 percent support in the country, and the broadly-held perception that it is written by and for the rich, that it’s a payoff, and they are comforting themselves, Republicans, with somehow the secure knowledge that once it passes and people start to see the benefits of it, that they will feel better about it.
I would remind them of 2010, the Affordable Care Act, not in social policy but political implication, once it passed, Democrats were sure that people would feel a lot better about it. And in 2010, of course, the Democrats suffered a stinging rebuke.
The Republicans will be on the defensive about this, as well they should be. The corporations that so desperately need this, there is only $2.3 trillion in offshore money they’re sitting on right now, and there is no provision at all, no requirement that they hire a single worker, retrain a single worker, expand a plant or anything of the sort, and it’s going to go right back to the shareholders, the stockholders and buying back stock.
Judy Woodruff: So, are they taking — David, are they taking — are Republicans taking a risk by what they’ve done?
David Brooks: Yes, I think so. I mean, I take the biggest picture. The big issue facing American domestic politics is widening inequality and the collapse of the working class. And so, the Obama administration, given this big problem, decided to spend their entire administration talking about the health insurance markets, which is really related to but tangential. The Republicans have decided to lose their majority on the corporate tax rates which really has nothing to do with the central problem.
So, what’s mystifying to me is that the two last administration’ and political establishment going on 12 years now is ignoring the big problem and tackling other problems. And so, that is going to mean that the inequality and the white working class and every working class that’s collapsing, that issue which drove the Trump election is going to be worse and worse and worse, and it will have effects we can’t predict right now.
Mark Shields: Not to be prickly, but I just point out that Barack Obama confronted the worst economic recession since the Great Depression. I mean, getting out of that was the prime concern. He brought us back from the precipice. I agree with you on the expanding inequality, but it wasn’t comparable in any way of 105 sustained months of job growth and economic growth under Barack Obama that was inherited by Donald Trump and is about to be squandered in this giveaway.
David Brooks: I’ll give you that, getting over the 2008, 2007 recession was big accomplishment early in the administration, but it still remains the fact that once they got over that, they could then turned to these — the Michigans, the Pennsylvanias, the Ohios, and either done infrastructure. They could have done a bunch of things, which are always on the table and everybody says they’re in favor of, and nobody actually does because it doesn’t go — and the Republicans, the donor base. And the Democrats, they have to have a thing about health insurance.
And the insurance markets, they were right to do that. There was just a small thing they did to help people get a lot more people get insured, but it did not — what mystifies me is our inability to even frontally address the main problem of the day.
Mark Shields: You’re right, but I just point out one thing, and that is saving the United States automobile industry, Ohio and Michigan, were not minor accomplishments and they were opposed by the Republicans and the Republican standard bearer.
David Brooks: Fair point.
SUMMARY: Congress returns from Thanksgiving to face an extreme to-do list for next month, including funding the government and voting on a tax plan. That comes on the heels of a public apology by Sen. Al Franken after allegations of groping women, and the decision by Rep. John Conyers to temporarily step down from the Judiciary Committee. Lisa Desjardins joins William Brangham to take a closer look at the tax plan.
William Brangham (NewsHour): So, CBO analysis is out. I would like to go through with what this means for different segments of the American population.
Let’s start with, what does this do for the poorest Americans?
Lisa Desjardins (NewsHour): That’s the big headline out of the CBO report that we got over the weekend.
In the past, William, we have seen analysis for how you do with the tax cuts portion of this, and in the Senate bill in particular, it phases out, for example, kind of in the out years. And so a lot of Americans would see a tax increase at the very end of this bill.
But what the CBO did is different. It didn’t just look at the tax cuts. It looked at the net effect, because, William, this bill is so large that it would likely trigger automatic spending cuts in various programs.
So, the CBO said, OK, let’s look at the combined effect of those two things, how your taxes would change under this bill, plus any benefits you get, any government programs that you get, any loss you would see from spending cuts.
And they found that those two things combined would have a dramatically larger effect on lower classes, people earning under $40,000, many times the effects we have seen in other analyses so far.
William Brangham: And impact meaning they would be paying more.
Lisa Desjardins: That’s right. They would be paying a little bit more in taxes, but they would lose a lot more in benefits, as programs like Medicaid, maybe Medicare would be hit by cuts.
William Brangham: Does the GOP agree with this analysis that this is really going to hammer the poor in America?
Lisa Desjardins: What they have said in the past — it’s notable, first of all, that none of the Republican committees overseeing this bill responded to my questions about this today directly.
They usually do. They’re busy. But, still, we don’t know their word on this. But in the past, William, what they have said is that the numbers actually don’t give you the full picture, because they say what they’re trying to do here is to cut taxes especially for the middle class.
And they say what is happening with the lower classes is, they have the biggest amount of benefits in the system, so what looks like a big cut to them is something coming off of already what the Republicans think are benefits that are outsized and a bloated government.
Now, of course, Democrats argue against that. They say the lower classes are the ones that need the biggest amount of benefits to begin with.
William Brangham: You mentioned this middle-class tax cut. That’s always been the President’s main objective in this.
What does the analysis show about that?
Lisa Desjardins: All right, let’s talk about where we are with middle classes.
The first statistic I want to look at is an important one. This is actually from a different analysis, from the Joint Committee on Taxation.
They found that, looking at the Senate bill, if you look at anyone making over $40,000, all of the income groups over that, on average, would see their taxes cut for the next eight years. Now, that’s a big deal. That’s what the Republicans want to do.
William Brangham: Sure.
Lisa Desjardins: They want to cut everyone’s taxes.
But, William, the average really doesn’t apply here. You can’t look at the tax cuts that way, because many millions of Americans fall into very broad groups whose deductions would be taken away.
Let’s start with one big one, the medical expenses deduction. If you have a very large amount of medical expenses, anything more than 10 percent of your income, you can deduct that on your taxes. So, say someone is facing a cancer diagnosis, and they don’t have strong insurance. They’re paying $100,000 out of pocket. They can deduct that from their taxes now.
The Senate and House bills would wipe that away.
William Brangham: That’s a huge tax increase.
Lisa Desjardins: It would be a massive punch to the gut for people who are already dealing with a major health crisis.
Then another group — we talked about before state and local taxes. Now, this is also a very huge group. Almost a quarter or maybe more than a quarter of Americans take state and local taxes off of their federal taxes. Of course, this affects mostly high-tax states. New Jersey gets brought up a lot, New York, but it’s also states like Maryland, California, Virginia.
A quarter of million American taxpayers would lose that deduction, most or all of it. And so, when you say, on average, the middle class would see a tax cut, well, really, everyone is unique, and you see a lot of unique situations where the taxes might go up.
William Brangham: The criticism of all this, of course, by the Democrats and some economists is that this is in a massive giveaway to the wealthiest Americans and corporations. How true is that?
Lisa Desjardins: Right.
So, I looked at all of the new data we got, including CBO's yesterday, and I compared it, looked at how much benefit you get or loss you get, combining all the spending cuts, the taxes, everything.
And, in fact, it’s true that the lowest-paid Americans would see the greatest harm. And if you go all the way to the top of the scale, by many times, those at the highest income level, say, $500,000 and above, would see not only the biggest benefit in dollar terms, William, but also in terms of percentage of their own income.
And that’s per person. So, it’s not a broad category. I really dove in on that analysis.
SUMMARY: Both the Senate and House tax overhaul bills could make higher education more expensive for some students, though in different ways. The biggest proposed changes in the House bill would end the deduction for interest paid on student loans, a deduction used by some 12 million people in 2015. John Yang learns more from Danielle Douglas-Gabriel of The Washington Post.
SUMMARY: The corporate tax rate is not the only important tax cut affecting businesses that's being considered in the Republican tax bills. The pass-through tax rate affects millions of small businesses, and has been a point of debate and dealing. Hari Sreenivasan talks to Jim Tankersley of The New York Times about that and who really gets the biggest cuts.
SUMMARY: Winning over holdouts like Sen. Jeff Flake, Majority Leader Mitch McConnell told reporters that Republicans had the votes to pass their tax bill, which could affect the U.S. for at least a decade. But as the clock ticked down, the final bill hadn't appeared, and Democrats railed against the idea of passing something without the final language in hand. Lisa Desjardins talks to Judy Woodruff.
SUMMARY: The Senate passed a $1.5 trillion tax package early Saturday, pushing closer to one of the largest overhauls of the U.S. tax code in decades. But the vote came just hours after the final text of the nearly 500-page bill was released, provoking several, last-minute negotiations on the Senate floor. Lisa Desjardins joins Hari Sreenivasan for more on what made it into the bill and what’s next.
SUMMARY: President Trump and congressional Republicans unveiled the most sweeping overhaul of the tax code in more than three decades. Many details are not yet decided, but the president told supporters in Indianapolis that the current tax code is a “relic” that must be made simpler. Judy Woodruff learns more from Greg Ip of The Wall Street Journal about the key changes in the proposal and its cost.
SUMMARY: Syndicated columnist Mark Shields and New York Times columnist David Brooks join Miles O'Brien to discuss the week's news, including how Hurricane Harvey might redirect Republicans' fall agenda, the Trump administration's response to the emergency, how the government will pay for the long and arduous recovery, whether the storm will shift political discourse about climate change and more.
MILES O'BRIEN (NewsHour): In addition to the grueling work of rescue and recovery on the ground, Hurricane Harvey has stirred up political challenges and marked the first natural disaster on President Trump's watch.
For what's at stake, we get the analysis of Shields and Brooks. That's syndicated columnist Mark Shields and New York Times columnist David Brooks.
Gentlemen, good to have you with us.
To what extent has the storm on Friday and what has ensued changed what's going to happen in Washington in September? Do you think this is a reset in a sense, David?
DAVID BROOKS, The New York Times: I have decided to take the most willfully confident or least optimistic point of view just maybe post-flood, that the dove comes bearing the olive branch.
And I do think there's potential for things to get better. The Republicans were headed toward dysfunction this fall with the budget showdowns, with this fight over the wall, possible government shutdown.
And now they at least have a pretext, all the while knowing they look dysfunctional and they have to get something done. Now they have a pretext to change the subject, to put some budget relief in there for the flood, without doing offsets, without trying to rip the money out from other programs.
And they could say, hey, we can't do the wall right now. We got to rebuild Texas. And, by the way, on the background, a lot of people are going to need a lot of construction workers in Texas. And this is a construction with a construction worker flourish.
So, maybe this isn't the time to crack down on immigration. And so I think there's a possibility, if they want to look functional, to seize this moment, whether they will or not. But I'm going for maximal optimistic unrealism.
MILES O'BRIEN: So, Mark, would you agree that the storm has given Republicans some cover for a kumbaya moment?
MARK SHIELDS, Syndicated Columnist: Not necessarily kumbaya moment, because I think that's impossible with Donald Trump; because he's so mercurial, so volatile, and so self-obsessed.
But I think it's great political opportunity for Republicans, partly for the reasons that David said. The old maxim in combat in World War II was, there are no atheists in a foxhole. There no libertarian, conservative, small-government people at a time when they're in the wake of a hurricane.
People turn — what's the government going to do? I want it done. Even the much ridiculed — and legitimately so — Ted Cruz, who ran for President proclaiming he was the most unpopular man in the Senate, earned that epithet, sobriquet by opposing any hurricane aid to the citizens of New York and New Jersey after Hurricane Sandy.
And 22 of the 23 Republican members of Congress from Texas, including John Cornyn, the senator and Cruz, opposed it [Sandy relief]. Now, of course, they are the biggest exhorters for federal aid, federal involvement, national government rushing in.
But I do think it's an opportunity for Republicans to unite and to get away from the wall and President's empty threat to close the government if it weren't funded.
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MILES O’BRIEN: What about tax reform? That was something that, in the midst of this storm, President Trump was talking about. Is there any chance there will be any traction on that?
MARK SHIELDS: There is no tax reform.
What it is, is a tax cut. And they have concluded that there’s a real problem in this country when it comes to money distribution, that the poor have too much and the rich don’t have enough. [Republican view] And this is the solution.
DAVID BROOKS: Just to make Mark feel good, I don’t think anything is going to pass.
I was thinking, who was in office, who was in power in 1986? You had Dan Rostenkowski in the House, a guy named Bob Packwood in the Senate, James Baker,
MARK SHIELDS: Patrick Moynihan.
DAVID BROOKS: Patrick Moynihan, Bill Bradley.
MARK SHIELDS: Bill Bradley. Dick Gephardt. Yes.
DAVID BROOKS: This was like the dream team of legislative skill.
MARK SHIELDS: Yes.
DAVID BROOKS: And there’s just nobody like that, because they don’t — people do not have the experience to pass complicated legislation, let alone a White House.
Tax reform is incredibly hard, because every time you cut a loophole, there’s an army that wants to preserve it. And it’s just hard to…
MARK SHIELDS: Dick Darman.
DAVID BROOKS: Dick Darman is another figure.
(CROSSTALK)
MARK SHIELDS: Yes. Yes.
(CROSSTALK)
DAVID BROOKS: We have sort of lost human capital in Washington of people who know how to do complicated stuff.
MARK SHIELDS: It’s a good point. We have devalued it.
When you run against Washington long enough, and deprecate public service, I mean, after a while, you stop attracting or making it appealing for talented people to come and to stay. And [back] then public service was an honorable and important…
(CROSSTALK)
DAVID BROOKS: The talent is a side, but the experience is low.
Those people had put through, over the previous 20 or 30 years, lots of complicated legislation, especially under Johnson, and even under Nixon.
And the people now, they just don’t have the experience of doing that.
SUMMARY: Republican leaders are starting to make decisions on how they will approach tax reform, an issue that's equally important as health care to Republicans, and one that's arguably even tougher to solve. Lisa Desjardins sits down with Judy Woodruff to walk through where efforts stand.
LISA DESJARDINS: First point, Judy. This is a process very different than health reform, than health care.
First of all, let’s look at who Republicans are using right now, who is determining this. It is the big six leaders. That means two leaders from the White House, the treasury secretary and also the president’s national economic adviser, then Leader McConnell in the Senate, as well as the chair of the Senate Finance Committee, and then Speaker Ryan himself and his tax-writing chairman. [note no Democrats]
SUMMARY: In the debate over health care reform, President Trump must now decide whether he will continue to make payments to insurance companies in order to cover out-of-pocket costs and deductibles for low-income consumers. Judy Woodruff speaks with Robert Laszewski, president of Healthcare Policy and Marketplace Review, about the ramifications of cutting off those subsidy payments.
SUMMARY: President Trump's tax reform blueprint calls for eliminating the alternative minimum tax and the estate tax, cutting all itemized deductions except for mortgage interest and charitable giving, and getting rid of taxes on the first $24,000 if a couple's earnings. How does that affect tax revenue? William Brangham gets reaction from Jared Bernstein of the Center on Budget and Policy Priorities.
SUMMARY: Why are American health care costs by far the highest in the world? Journalist and former practicing physician Elisabeth Rosenthal chronicles how we got here in her new book, "An American Sickness." Economics correspondent Paul Solman talks with Rosenthal about the forces driving high prices and what could be done to bring costs down.
SUMMARY: Amy Walter of The Cook Political Report and Tamara Keith of NPR join Judy Woodruff to discuss what a win in a surprisingly competitive special election in Georgia would mean for Democrats, how Republicans are learning the difficulty of governing and more.
