Tax Cuts and Jobs Act (2017)

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    A Road Map for Undoing the Damage of the Big, Awful Bill

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    In the 30 years I have been a part of fiscal policymaking I don’t think I have ever seen a legislative push as impressive as the passage of President Trump’s big, dubious tax and policy bill.Don’t get me wrong: The consequences for health insurance, poverty, climate change and macroeconomic stability, in roughly that order of importance, will be horrendous. The Medicaid and other health care changes would undo about three-quarters of the coverage expansion from President Barack Obama’s Affordable Care Act and Medicaid expansion. The law repeals much of what Joe Biden did for climate change in the Inflation Reduction Act. The tax provisions sustain most of the cuts from Mr. Trump’s first term and add in several others for good measure.But before Democrats — and hopefully some Republicans — even try to fix the damage, they should learn the lessons of how the Republicans got all this done, working against tremendous odds on a much faster timetable than the major legislative accomplishments from Mr. Trump’s three predecessors.The first lesson is that ideas really do matter. This legislation did not happen because the public or lobbyists were clamoring for it. Instead Donald Trump and congressional Republicans wanted it and were willing to overcome public disfavor and opposition from vested interests.Sure, special interests were at play in ways big (preserving workarounds to limits on state and local tax deductions) and small (getting new tax breaks for Alaskan whaling captains). But no major lobbying groups were asking for the broad contours of this legislation. The health care industry, which is expected to lose about half a trillion dollars, and the energy industry, which is losing huge tax breaks and subsidies, put up a fight. Their opposition, like that of other industries, went nowhere. And neither did Elon Musk’s — further evidence that oligarchy is the wrong lens through which to view this political moment.The second lesson is that while ideas matter, expert ideas do not necessarily matter. Past fiscal debates have divided economists and policy wonks. In President Trump’s first term, some economists would write opinion articles or go on TV news programs defending his tax cuts as adding to growth while other economists (including me) would write rebuttals.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Trump May Get His ‘Big Beautiful Bill,’ but the G.O.P. Will Pay a Price

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      And so will many voters.There will be many short- and long-term consequences if Republicans succeed in passing President Trump’s signature policy bill, as they aim to do before the July 4 holiday, David Leonhardt, the director of the Times editorial board, tells the national politics writer Michelle Cottle in this episode of “The Opinions.”Trump May Get His ‘Big Beautiful Bill,’ but the G.O.P. Will Pay a PriceAnd so will many voters.Below is a transcript of an episode of “The Opinions.” We recommend listening to it in its original form for the full effect. You can do so using the player above or on the NYT Audio App, Apple, Spotify, Amazon Music, YouTube, iHeartRadio or wherever you get your podcasts.The transcript has been lightly edited for length and clarity.Michelle Cottle: I’m Michelle Cottle and I cover national politics for Times Opinion. So with the July 4 weekend looming, I thought we’d talk about a different kind of fireworks: that is, President Trump’s “big, beautiful bill” and as always, I hope the air quotes there are audible for everybody.But that bill looks like it is on track for passage. From Medicaid cuts to tax breaks for the rich, it is a lot. Thankfully with me to talk about this is David Leonhardt, the fearless director of the New York Times editorial board, who has some very pointed thoughts on the matter. So let’s just get to it. David, welcome.David Leonhardt: Thank you, Michelle. It’s great to be talking with you.Cottle: I’m so excited, but warning to all: We are recording on Monday midday and even as we speak, the Senate is brawling its way through to a final vote. So the situation is fluid and could change the details by the time you all hear this.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Republican Tax Bill May Hurt the Lowest Earners and Help the Richest

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      Even though most Americans may see lower taxes, Republicans’ spending cuts could outweigh those benefits and leave some worse off.As Representative Jason Smith commenced a marathon session this week to consider a sprawling and expensive Republican tax package, he took special care to emphasize his party’s commitment to “hard-working Americans.”“Pro-growth tax policy will shift our economy toward one that serves them, not the wealthy and well-connected,” Mr. Smith, the Missouri lawmaker who leads the House’s top tax panel, proclaimed.But the proposal he is trying to get to President Trump’s desk ultimately tells a more complicated story. The Republican tax plan may offer only modest gains to everyday workers, according to a wide range of tax experts, and some taxpayers may actually be left in worse financial shape if the bill becomes law.The latest assessment arrived Friday from the Penn Wharton Budget Model, a nonpartisan scorekeeper closely watched on Capitol Hill. Economists found that many Americans who make less than $51,000 a year would see their after-tax income fall as a result of the Republican proposal beginning in 2026.The Penn Wharton estimate sought to analyze the full scope of the Republican tax package, computing the effects of the tax cuts as well as the plan to pay for them by slashing federal spending on other programs, including Medicaid and food stamps. Combined, those policies could fall disproportionately on the poorest, including those near or below the poverty line, the economists found.People making between about $51,000 and $17,000 could lose about $700 on average in after-tax income beginning in 2026, according to the analysis, when factoring in both wages and federal aid. That reduction would worsen over the next eight years. People reporting less than $17,000 in income would see a reduction closer to $1,000, on average, also increasing over time, a shortfall that underscores their reliance on federal benefits.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Someone Should Tell Trump He’s About to Make the Trade Deficit Worse

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      There are many reasons President Trump should not be pushing Congress to pass huge tax cuts, but here’s one you may not have heard: Budget deficits and trade deficits are twins. When the former go up, so, generally, do the latter. So at the same moment Mr. Trump is upending the global economy in a feckless attempt to eliminate America’s trade deficit, he’s essentially pressuring Congress to increase it.Here’s how it happens. The United States buys a lot of goods from other countries, and we pay for the goods with dollars. But those dollars are no good abroad, so the countries we buy from invest them here. Some of the money goes, directly or indirectly, into businesses that are raising cash to build new data centers or expand natural gas facilities or construct new apartment complexes. Other dollars go into Treasury bonds or bills, which the federal government uses to fund our large budget deficit. (The same thing happens in reverse when other countries buy from the United States — but to a lesser degree, since our imports are larger than our exports.)If the budget deficit rises, American investors could theoretically cover the shortfall, but that would mean putting their money in Treasury securities rather than businesses and their capital needs. The other option is that foreign countries amass more dollars and plow them back into the U.S. economy. How would they get those additional dollars? From all the German cars and Chinese electronics and imported beer that Americans will buy with the money from their tax cuts.More generally, a larger budget deficit will require the government to borrow more money, which drives up interest rates. Higher interest rates mean a stronger dollar, which makes it more expensive for people in other countries to buy our products, cheaper for us to buy theirs, and thus the trade deficit widens.So cutting taxes, as Mr. Trump has told Congress to do, will drive up the budget deficit — and the trade deficit. All of this may seem counterintuitive, but it’s one of the few things that economists agree about.The budget deficit is already worryingly high and the tax cuts Mr. Trump is seeking would make it even larger. Last year the United States ran a $1.8 trillion budget deficit, or 6 percent of the gross domestic product — higher than at any other time except during World War II, the late-2000s financial crisis and the Covid-19 pandemic — despite strong economic growth and no unusual emergencies.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Republicans Wrestle With Trump’s Demands for Tax Cuts

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      House Republicans are planning to include several of President Trump’s campaign promises in the first draft of the bill, which they hope to release soon.It was easy to miss, but last weekend President Trump floated a fundamental rewrite of the American tax code. In a social media post, and again in remarks to reporters, Mr. Trump suggested the United States could stop taxing income under $200,000 and instead rely on revenue from his extensive tariffs.“It’ll take a little while before we do that, but we’re going to be cutting taxes, and it’s possible we’ll do a complete tax cut,” Mr. Trump told reporters on Sunday. “Because I think the tariffs will be enough to cut all of the income tax.”The idea was news to Republicans on Capitol Hill already in the throes of translating Mr. Trump’s impulses for cutting taxes into law.Senator Mike Crapo, a Republican from Idaho who leads the Finance Committee, said he had not heard from Mr. Trump or his staff about the proposal. “So I just don’t know what that’s referencing,” he said.Likewise in the House, where Republicans are preparing to release their first stab at the tax bill in the coming days. “We aren’t having that discussion at all — it’s never come up,” Representative Lloyd Smucker, a Republican from Pennsylvania and a member of the Ways and Means committee, said of not collecting income taxes on earnings under $200,000.Even if they take a pass on Mr. Trump’s most recent notion, congressional Republicans are straining to incorporate several of his previous tax proposals into the legislation. Those include not taxing tips, overtime pay or Social Security benefits, three of Mr. Trump’s campaign pledges that the White House has continued to push in his second term.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Republicans Plan to Skirt Senate Rules to Push Through More Tax Cuts

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      G.O.P. leaders are planning to use the “nuclear option” to steer around the Senate’s in-house referee and allow the use of a gimmick that makes trillions of dollars in tax cuts appear to be free.For decades, senators looking to push major budget and tax legislation through Congress on a simple majority vote have had to win the blessing of a single unelected figure on Capitol Hill.The Senate parliamentarian, a civil servant who acts as the arbiter and enforcer of the chamber’s byzantine rules, has traditionally been in a position to make or break entire presidential agendas. That includes determining whether budget and tax legislation can be fast-tracked through Congress and shielded from a filibuster, allowing it to pass along party lines through a process known as reconciliation.Now, in their zeal to deliver President Trump’s domestic policy agenda in “one big beautiful bill” of spending and tax cuts, Senate Republicans are trying to steer around the parliamentarian, busting a substantial congressional norm in the process.The strategy would allow them to avoid getting a formal thumbs up or thumbs down on their claim that extending the tax cuts that Mr. Trump signed into law in 2017 would cost nothing — a gimmick that would make it easier for them cram as many tax reductions as possible into their bill without appearing to balloon the deficit.In recent days, all eyes have been on Elizabeth MacDonough, the parliamentarian, to see whether she would bless the trick, smoothing the path for the G.O.P. bill. But on Wednesday, Republicans signaled that they planned to take extraordinary action to go around her altogether.Rather than have Ms. MacDonough weigh in, they asserted that Senator Lindsey Graham of South Carolina, as chairman of the Budget Committee, could unilaterally decide the cost of the legislation, citing a 1974 budget law. Senate Republicans on Wednesday unveiled a new budget resolution they planned to put to a vote as early as this week. And Mr. Graham declared in a statement that he considered an extension of the 2017 tax cuts to be cost-free.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      U.S. Could Run Out of Cash by May, Budget Office Predicts

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      The Congressional Budget Office said that the so-called X-date could occur as early as spring if Congress does not lift or suspend the nation’s debt limit.The U.S. could run out of money to pay its bills by late May if Congress does not raise or suspend the nation’s debt limit, the Congressional Budget Office said on Wednesday.The forecast puts added pressure on Congress and the Trump administration to address the borrowing cap, which restricts the total amount of money that the United States is authorized to borrow to fund the government and meet its financial obligations. A protracted standoff later this year could rattle markets and complicate President Trump’s plans to enact more tax cuts.The C.B.O. noted that its forecast is subject to uncertainty over how much tax revenue the federal government will collect this year. It expects that the United States will have sufficient funds to keep paying bills through August or September. However, it said that if borrowing needs exceed its projections, the U.S. could run out of cash by late May or sometime in June.“The projected exhaustion date is uncertain because the timing and amount of revenue collections and outlays over the intervening months could differ from C.B.O.’s projections,” the budget office said in a report.The so-called X-date is the moment when the United States is unable to pay its bills, including interest payments to investors who hold government debt. Failure to meet those obligations could result in the United States defaulting on its debt. The U.S. has never defaulted on its debt, which is considered one of the safest investments in the world, and brinkmanship over missed payments could be economically damaging.The national debt is now approaching $37 trillion. Lawmakers agreed in June 2023 to suspend the $31.4 trillion debt limit until Jan. 1, 2025.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      PCE Report Showed Inflation Eased Slightly in January

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      But consumer spending unexpectedly slowed, complicating the central bank’s plans for interest rates.Getting inflation under control since the worst surge in decades has been a bumpy process in recent months. New data on Friday showed a little progress, but also an unexpected pullback in consumer spending, complicating the path forward for the Federal Reserve as it debates when to restart interest rate cuts.The central bank’s preferred inflation measure, released on Friday, climbed 2.5 percent in January from a year earlier, slightly lower than the previous reading of 2.6 percent but still well above the central bank’s 2 percent target. On a monthly basis, prices increased 0.3 percent, in line with December’s pace.The “core” personal consumption expenditures price index, which strips out volatile food and energy costs and is closely watched as a gauge for underlying inflation, rose another 0.3 percent in January. Compared to the same time last year, it is up 2.6 percent, data from the Commerce Department showed. In December, it rose at an annual pace of 2.8 percent.The inflation figures were in line with what economists had expected and underscored the Fed’s decision to proceed cautiously with interest rate cuts after making adjustments in the second half of last year. The interest rate set by the Fed stands at 4.25 percent to 4.5 percent.Spending fell 0.2 percent in January, led by a drop in spending on cars and other goods. Economists had expected a 0.2 percent increase overall, following a 0.8 percent increase in December. Once adjusted for inflation, spending dropped by 0.5 percentage points, which is the sharpest monthly drop in almost four years.Thomas Ryan, an economist at Capital Economics, attributed the decline in part to “unseasonably severe winter weather,” but warned that the Fed’s job will become “trickier if January’s sharp decline in consumption was a sign of consumer strength buckling.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Republicans Want Lower Taxes. The Hard Part Is Choosing What to Cut.

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      House Republicans are preparing to adopt a plan that puts a $4.5 trillion limit on the size of the tax cut, but even that will not be enough for some of President Trump’s promises.Since their party swept to power, Republicans have entertained visions of an all-inclusive tax cut — one that could permanently lower rates for individuals, shower corporations with new incentives and deliver President Trump’s sprawling suite of campaign promises.If only it were so easy.House Republicans are preparing to adopt a budget plan that puts a $4.5 trillion upper limit on the size of the tax cut. Even such a huge sum is not nearly enough for all of their ideas, and so lawmakers must now decide which policy commitments are essential and which ones they can live without.For a sense of the Republican predicament, take a look at the 2017 tax cuts. Many of the measures in that law, including a larger standard deduction and more generous child tax credit, expire at the end of the year. The overriding goal of this year’s bill is to extend the expiring provisions, which provide their largest benefits to the rich, before they end.But accomplishing just that would cost roughly $4 trillion over the next 10 years. Then there’s a coveted business tax break for research and development — which, in an example of the zigzag of tax policy in Washington, Republicans wound down in 2017 and now want to revive. That would be another $150 billion. Allowing companies to once again deduct more of the interest on their debt is another $50 billion.Those changes are the table stakes. They essentially amount to preserving the status quo. And together they would eat up all but $300 billion of the $4.5 trillion Republicans are giving themselves to cut taxes. That’s not very much money, considering the ambitions Mr. Trump and other Republicans have for the bill.The squeeze is on.“You do start running out of space to do other things,” said Andrew Lautz, a tax policy expert at the Bipartisan Policy Center, a think tank.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More