BRUMMETT ONLINE: Driving the votes

Published 7 December 2017

In the early-morning hours Saturday, the Republican U.S. Senate passed a massive tax bill it had been amending on the fly to buy votes only hours earlier.

The bill, passed 51-to-49, possibly would give working people a small income-tax cut. It certainly would give rich people and corporations a large one.

And it was passed with an allowance for increasing the federal deficit by more than a trillion dollars over a decade.

A working family might, if it’s lucky, get from the bill enough cash to afford a new set of tires. That would depend on whether the family took the standard deduction or had enough deductions for itemization, and, if so, what those items were, and how big the deductions were, and how many children were in the family and whether they received paid child care. Otherwise, it’s simple.

A hedge-fund billionaire would get yet more millions. Not might. Would. Period. There are no contingencies. What the hedge-fund billionaire is paying in taxes today would be less by millions next year.

So, to recap: A tax bill thrown together in the wee hours that favors the rich over working people and is officially forecast to lather more debt on the next generation … it’s entirely up to working people whether that’s the kind of political representation they like, and whether that’s what they thought Donald Trump meant by making America great again.

(They probably meant the 1950s, or think they do. The federal income rate on the very highest income category was 91 percent in the 1950s.)

Did Republicans cynically contrive all of that? Probably not all. Is some of the scandal incidental? Yes, to an extent, probably, which makes it no less scandalous in effect.

That’s if you agree it’s immoral to give billionaires certain millions and working people possible hundreds and run up the deficit to do it.

Here’s how it can happen in both an intentional and incidental way:

Republicans were cornered, needing to pass a tax-cut bill. At a recent Koch brothers’ retreat, rich right-wingers talked of how they’d contribute not another penny to Republican congressional candidates if they couldn’t avail themselves of their majorities to cut taxes.

U.S. Sen. Lindsey Graham had candidly explained that the Republicans needed to get a tax cut passed to remain competitive in the midterm elections next November.

The stock market was strung out on bullishness grounded in a belief that, surely, Trump Republicans would get taxes cut as they promised.

But tax legislation is complicated, with one change over here causing an unintended consequence over there.

In search of their 50 votes in the Senate, with Vice President Mike Pence standing by for the 51st, Republicans encountered a few members who were holding out because of specific objections.

One was that, while corporations would get their tax rate dropped from 35 percent to 20 percent, small-business persons making their livings by company earnings passed through to them would continue to pay income individual taxes and not realize the kind of percentage savings flowing to corporations.

There was no choice for Senate Republicans other than to attend to those objections. So, they raised the basic deduction for pass-through income — which is what you call the money a small-business person takes from his company — from about 17 percent to about 23 percent.

The late amendment excluded most physicians, lawyers and accountants on the basis that their pass-through incomes are often more like wages than business profits.

As it happens, many hedge funds — and most of Trump’s companies — are organized as partnerships, thus on a pass-through income basis. These wealthy types would share the new deduction presumably designed for small business. That higher deduction would mean millions in tax savings at the billionaire level.

Couldn’t the Senate GOP leadership have carved out some high-income businesses from the new pass-through deduction ostensibly designed for small business? Yes, it could have. But it had no votes to spare. Such a carve-out might offend other Republicans believing that any new rate for pass-through income ought to apply to all pass-through income no matter the abundance of it.

Plus, as tax experts can tell you, the elite accountants for those of elite income can behold a line and figure out how to get on the cheaper side of it.

The practical thing was to let House-Senate conferees figure out what to do.

Thus, the fate of your tax liability for 2018 will rest with a few senators and House members meeting privately like cardinals choosing a pope and getting chatted up in the halls during bathroom breaks by the finest insider lobbyists.

Meantime, a real small-business person — a landscape lighting guy, let’s say — will be on his knees planting wires in the ground to try to make a pass-through profit at the end of the year amounting to, oh, let’s say $70,000 to $100,000.

He’ll realize a little savings — a few hundred dollars, maybe — from whatever the conference committee reports. Maybe he can put some money aside for his kid’s college education, perhaps in a stock fund that will earn healthily, at least for a while.

He’ll be too busy planting wires to conduct an in-depth study of the fairness of his treatment relative to others or the broader implications of American tax policy.

He has a little more change in his pocket. And the market for landscape lighting seems to have picked up a bit.

If he voted Trump before, he might again in 2020.

His decision probably won’t hinge on how a hedge-fund billionaire is taxed, but on what the economy is doing at election time for the landscape lighting business.

John Brummett, whose column appears regularly in the Arkansas Democrat-Gazette, was inducted into the Arkansas Writers’ Hall of Fame in 2014. Email him at jbrummett@arkansasonline.com. Read his @johnbrummett Twitter feed.