Email #332: “benefit of hindsight”?

The day after the GOP released its tax plan last week, the first national poll showed that only 33% of Americans support it, while 50% oppose it. Though you have said it’s designed to help the middle class, 60% see that it favors the wealthy.

Why aren’t Americans coming together to support this bill? President Trump wrote in USAToday on October 22, the anniversary of President Reagan signing the Tax Reform Act of 1986:

“Republicans and Democrats came together to cut taxes for hardworking families in 1981, and again in 1986 to simplify the tax code, so that everyone could get a fair shake… We have the benefit of hindsight as we look back at the three decades since our country’s last major tax reform. We can see what worked and what did not.”

The President is right. Republicans and Democrats did come together in 1986, and we should use the benefit of hindsight to understand why that worked.

The 1986 Tax Reform closed loopholes, increased personal exemptions, increased standard deductions, and even increased the capital-gains tax, balancing the revenue lost from reduced corporate taxes and so keeping the deficit under control. This balanced approach resulted in the bill passing by wide margins, 292 to 136 in the House and 74 to 23 in the Senate. This was despite Democrats holding a majority in the House and nearly half the seats in the Senate—where they soon took a 5-seat majority in the elections held two weeks after the tax reform was enacted.

The so-called Reagan tax cut was a bipartisan bill sponsored by a Democratic senator and a Democratic representative and passed by more Democratic votes than Republican. When President Reagan signed it into law, he was surrounded by both Democrats and Republicans. Even opposition was evenly split with 11 Republicans and 12 Democrats voting against the bill. In the House, 86 Republicans and 74 Democrats opposed it too.

In contrast, the proposed Trump tax plan has attracted no Democrats and has already lost the votes of 21 Republicans, while others approved its budget blueprint while expressing serious misgivings. Instead of seeking bipartisan compromise, Senate Republicans enacted special budgetary rules that would enable a tax bill to pass by 50 instead of 60 votes–the same approach they applied to repealing Obamacare and failed. Instead of modeling the proposal on Reagan’s aisle-bridging and revenue-balancing approach, President Trump and GOP leaders are attempting to push through an exclusively partisan and deficit-expanding bill in a matter of weeks. The 1986 plan took nearly two years.

Why isn’t the GOP following President Trump’s advice and using the benefit of hindsight to see what worked then and so what is not working now?

Email #331: “the unfair estate tax”?

According to the Republican tax plan revealed yesterday, the estate tax will be eliminated immediately for inheritances smaller than $11 million (double the current cut-off), and then after six years eliminated for all inheritances no matter how large.

Anticipating this proposed change, you said on September 29:

“I am also pleased to see an elimination of the death tax, which unfairly targets family farms and small business owners.”

You are either grossly misinformed or this is an intentional lie. The estate does not target family farms and small businesses. It hardly affects any family farms and small businesses at all.

President Trump made the same lie two days earlier in his September 27 speech in Indianapolis:

“To protect millions of small businesses and the American farmer, we are finally ending the crushing, the horrible, the unfair estate tax, or as it is often referred to, the death tax.”

Currently the estate tax only applies to the 5,460 Americans whose estates are worth more than $5.43 million. How many of those millionaires are family farmers? According to Political Fact-Check: only 16-24 total estates. That’s why the website gave Bill Maher a “Mostly True” rating when he said: “More astronauts have been to the moon than farmers who paid the inheritance tax in 2013.”

According to the Tax Policy Center, only a total 80 farms and small businesses will pay the estate tax in 2017. But the President said he wanted to repeal it in order to protect “millions of small businesses and the American farmer.” Describing 80 as a minimum of 2,000,000 is not merely an exaggeration. It is a lie.

According to the U.S. Census Bureau, there were 27.9 million small businesses in the U.S. in 2010. Even if you don’t subtract the 16-24 family farms, the difference between 80 and 27,900,000 is even greater than the President’s lie. The overwhelming majority of small businesses are not affected by the estate tax. And yet you say they are the “targets”?

According to the Joint Committee on Taxation, repealing the estate tax will cost about $270 billion in lost revenue over the next ten years. Farms and small businesses will account for less than 1/5th of 1% of that total. Repealing the tax will not help “family farms and small business owners.” It will instead help the multi-millionaires the tax currently targets.

Why are you so desperate to repeal the estate tax that you are willing to tell such verifiable lies?

Email #329: “end of us as a party”?

According to an October Gallup survey, 84% of Americans think “the most important problem facing America today” is non-economic, and dissatisfaction with poor government leadership tops the list at 20%. Of the 17% who think the most important problem is economic, unemployment and the state of the economy in general each hit 5%, and the national debt 4%.

Only 2% named taxes.

And yet you and other Republicans in Congress have made taxes your number one issue. I understand that, despite the distraction of the special counsel indictments on Monday and the death of eight people in a terrorist attack in New York yesterday, Congressional leaders are releasing their full tax bill today.

My main confusion is how tax cuts became so much more important to you than the national debt. Despite decades of criticizing Democrats for deficit spending, both House and Senate Republicans voted for a budget blueprint that would raise the national debt by $1.5 trillion. It passed by only two votes in the Senate and four in the House. Only twenty House Republicans and one Republican Senator opposed the resolution, including the conservative House Liberty Caucus. Rep. Gaetz said members were “asked to vote for a budget that nobody believes in so that we have the chance to vote for a tax bill that nobody’s read.” Centrist budget hawk Rep. Jenkins agreed: “We should be passing a budget that reforms mandatory spending and balances over time.”

Why were you not one these principled critics? You have spent a quarter century advocating for debt reduction and balanced budgets, but when the defining issue of your career conflicted with tax cuts, you went with tax cuts.

The deficit grew by $666 billion in 2017. That’s $80 billion more than in 2016. According to the Congressional Budget Office, the national debt will rise $10 trillion over the next ten years. That’s based on current projections, but if the tax cuts are passed, the projections are significantly worse. The CBO recommended two actions: cut spending and increase revenues. Instead the budget blueprint decreases revenue by $1.5 trillion and only makes suggestions for spending cuts—ones that will be nearly impossible to enact afterwards. Do you believe Americans will accept cutting $470 billion from Medicare and $1 trillion from Medicaid?

And yet you voted for the resolution, ignoring the following argument:

“It is a simple concept — you can’t spend more than you take in.  Business owners, individuals and families all across this country understand this concept and live by it in their own lives.  They should expect nothing less from the federal government and yet Congress continues to prove it cannot make the tough decisions on its own.  We must rein in the skyrocketing deficit spending that is discouraging investment and threatening to bankrupt our nation.”

You wrote that. The paragraph appears on the “Fiscal Responsibility” page, which still also refers to President Obama as though he were still in office, continuing evidence that you no longer care about balancing the budged and reducing the debt.

You of course are not alone in embracing the GOP’s new policy of fiscal irresponsibility. Rep. Black, chair of the House Budget Committee, criticized the budget blueprint when it was still in the Senate, tweeting: “What part of ‘cut spending’ does @SenateGOP not understand?” And yet she, like you, still voted for it in the House last Friday.

Senator Graham endorsed it out of fear of angry voters: “This is the last, best chance we will have to cut taxes. That will be the end of us as a party, because if you’re a Republican and you don’t want to simplify the tax code and cut taxes, what good are you to anybody?”

But only 2% of voters are calling for tax cuts, while 20% want better leadership from their government, making the GOP tax plan a double failure. Will you continue to support it?

Email #314: “we’re being fiscally irresponsible”?

“What happened to him? He used to be the fiscal hawk.”

That’s what Republican Senator Corker said of your former House colleague, Budget Director Mick Mulvaney. But Corker could have been talking about almost anyone in the GOP right now. After decades of a seemingly principled stance against deficit spending, many Republicans are suddenly abandoning that position in order to push through what apparently has always been more important to them: tax cuts.

Former fiscal hawk Rep. Womack said: “In order to make good on our campaign tax promise, there probably are going to be some sacrifices made from an ideological perspective.” Do you agree that abandoning your career-long opposition to deficit spending is a necessary “sacrifice”?

Some of your Republican colleagues are rationalizing it with predictions of extraordinary tax-cut-triggered economic growth, even though economists disagree. Senator Johnson said: “Just agree we’re going to lose money on a static scoring basis. I’m happy to live with a $2-3 trillion static loss.” Are you also “happy” with the national debt rising to $2-3 trillion?

At least some of your colleagues are resisting these optimistic predictions. Rep. Dent said: “I don’t want to be overly optimistic about how much growth will be generated.” And Senator Young said: “we can’t assume unreasonable rates of economic growth or we’re being fiscally irresponsible.”

But other former fiscal hawks now think fiscal irresponsibility is okay. Rep. Meadows said: “you have to mitigate the damage by being as aggressive as you can be on tax rates, which would lessen the damage of our lack of fiscal responsibility over time.” Do you also hope to lessen the damage of your lack of fiscal responsibility?

I wrote to you in September that your staff hasn’t updated the “Fiscal Responsibility” page of your website since President Trump took office. It still refers to Obama as our President. I guess you and your staff are too busy trying to pass deficit-expanding tax cuts to even pretend that you still care about your career-long commitment to eliminating the deficit?

Term limits and fiscal responsibility were your defining positions when you entered office a quarter century ago. What other core values are you willing to “sacrifice” next?

Email #299: “everyday American workers”?

The President says “the biggest winners” of his tax plan “will be the everyday American workers.” You prefer the phrase “hardworking families,” but they won’t be the winners either. These are just PR phrases designed to sell a tax plan to voters who won’t benefit from it.

How does the elimination of taxes on large inheritances help everyday American workers and hardworking families? The current estate tax only applies if an estate is over $5.45 million. If you’re inheriting that much, then you’re not an everyday worker. I believe your own net worth is in that low multi-million dollar range, and so the elimination of the estate tax might be a huge benefit to your son in California but not to the vast majority of your constituents here in Virginia. The hardworking families in our district will receive nothing when you die.

And how does lowering the tax rate from 39.6% to 35% for the wealthiest individuals help everyday American workers either? Again, you and your family will personally benefit, but the majority of your constituents will not. If you and the President want to help hardworking families, why don’t you leave the high-income tax rate where it is and significantly drop rates for middle and working class Americans instead?

The President’s plan would also get rid of the alternative minimum tax, a measure that prevents wealthy Americans like you from ducking taxes all together. The easiest way to avoid the alternative minimum tax is to earn less $415,000, something everyday families do automatically. Once again, how does this help them?

So the President’s plan includes: 1) no estate tax for the wealthy, 2) a lower tax rate for the wealthy, and 3) no minimum tax for the wealthy. Could you please explain how exactly “the biggest winners” would be “the everyday American workers”? How does any of this help “hardworking families” at all?

 

Email #296: “a positive step forward”?

You said on Wednesday: “The tax reform framework unveiled today is a positive step forward in getting tax reform signed into law that lowers rates for individuals and families and helps level the playing field for American businesses.”

While I appreciate your optimism, I’m confused by how the Trump tax plan contradicts your dedication to debt reduction. The Senate Budget Committee resolution would reduce tax revenue by a $1.5 trillion over the next decade. Outside budget watchdog groups estimate the actual revenue loss would be more than $2 trillion. Previous tax plans put forward by the Trump administration had projected costs of $3 trillion and even $7 trillion. Whatever the revenue loss, that’s money added directly to the national debt.

According to the Committee for a Responsible Federal Budget: “The president and members of Congress have spent years warning of our large and growing national debt and have said their goal was to pursue tax reform that doesn’t make that debt worse. It is extremely disheartening that the Senate budget may be abandoning that commitment.”

According to the Peter G. Peterson Foundation: “Irresponsible tax reform is counterproductive and anti-growth because increasing the national debt hurts the economy. Tax reform should grow the economy, not the debt. This proposal fails the test of fiscally responsible tax reform.”

According to the Bipartisan Policy Center: “We are running a debt of $20 trillion-plus. We have to remember that debt is a tax on future generations, and so we talk about the immediate benefits, but also we have to recognize — if this added to the debt significantly, we are simply transferring a tax to future generations.”

And you said yourself: “It is a simple concept — you can’t spend more than you take in.” And the Trump tax plan will take in trillions less.

But it seems you no longer care about debt reduction–or you only care about it when there’s a Democrat is in the White House.

According to the “Fiscal Responsibility” page of your website: “Today, the national debt has soared well past a staggering $19 trillion. Our national debt has doubled since this Administration was elected to office, as the national debt was $9 trillion in 2008.” President Trump has been in office nine months now, but when you say “this Administration” you mean President Obama. You then brag about two balanced budget amendments that you introduced in 2015, describing one in the present tense as if it were still under consideration. It’s not. You even reference the 112th Congress—which ended in 2013.

With a Republican in the White House, I would think you would be excited about your annual ritual call for a balanced budget amendment. Instead, you literally abandoned “Fiscal Responsibility.” Are you planning on updating the page before this Congress ends, or will you wait until there’s a Democrat in the White House again?

Meanwhile, how can you say the government is taking “a positive step forward” when that step is toward an even higher national debt? Reducing the national debt is the signature issue of your quarter-century career in Congress. If you are willing to abandon it, what if anything do you represent?

Email #269: “middle-income tax cut”?

Given your career-long dedication to balanced budgets and deficit reduction, you must be very concerned about the President’s proposed tax plan. According to the Tax Policy Center, it would undermine efforts to balance annual budgets over the next decade by dropping revenues by $6.2 trillion, and it would raise the debt by $20.9 trillion come 2036.

Many of your GOP colleagues seem fine with that, since the plan also cuts taxes for the wealthiest Americans. Treasury Secretary Mnuchin said after the election: “Any reductions we have in upper-income taxes will be offset by less deductions so that there will be no absolute tax cut for the upper class,” insisting that the plan “is a middle-income tax cut.” But the Tax Policy Center instead found that “the largest benefits, in dollar and percentage terms, would go to the highest-income households.”

Secretary Mnuchin later rescinded the so-called “Munchin rule,” repeating at his Senate confirmation hearing only that: “If confirmed, I am committed to working with Congress to craft the best possible tax reform plan to serve all Americans.” Yet in that current plan, the top 0.1% Americans get a 14% tax cut, middle-earning American only 1.8%, and Americans in the lowest bracket less than 1%.

Speaker Ryan promised “to fix this nation’s tax code once and for all,” something that would be “absolutely transformational, something that will have a truly lasting impact.” Why then is the GOP approaching this “once-in-a-lifetime” opportunity through the special budgetary process of reconciliation? If the GOP leadership can’t convince sixty senators to end a potential filibuster, does such a “truly lasting” bill that changes the code “once and for all” deserve to move forward?

Although the Trump administration has abandoned its revenue-neutral pledge for the wealthy while also showing no concern for the expanding deficit, will you retain the conservative values that have defined your quarter-century career as a Congressman and oppose any tax bill that violates them?

Email #268: “right through the roof”?

In December 1991, Donald Trump said: “What caused the savings and loan crisis was the 1986 tax law change. It was a disaster. It took all of the incentives away from investors.”

He expanded his criticism in November 1991 when he spoke at a House hearing on U.S. Economic Recovery: “I truly feel this country is right now in a depression … and one of the reasons we’re there is what happened in 1986… This tax act was just an absolute catastrophe for the country, for the real estate industry, and I really hope that something can be done.”

Eight years later Donald Trump’s opinion was the same. He said in the Wall Street Journal in 1999: “We lost the jobs. We lost the taxes. They closed the buildings. They closed the plants and factories. We got nothing but unemployment. We got nothing.”

And yet President Trump said this week: “In 1986, Ronald Reagan led the world by cutting our corporate tax rate to 34 percent … under this pro-America system, our economy boomed. It just went beautifully right through the roof. The middle class thrived, and median family income increased.”

So which was it? Did Reagan’s 1986 tax reform make the economy catastrophically crash or boom beautifully? Perhaps economists and politicians can disagree on interpretations, but the President’s “hope that something can be done” did come true. Congress had already raised the highest income tax rate from Reagan’s 28% to 31% in 1990. Then, after Trump spoke at the House hearing on U.S. Economic Recovery, Congress raised it again, to 39.6%–where it remains right now. Trump spoke and Congress listened.

President Trump would now like to drop it to 35%, contradicting his own advice to Congress. He would also like to drop the Capital Gains tax to 20%. When Reagan took office, the Capital Gains rate was 28%. Reagan’s first tax plan lowered it to 20% in 1982, but the 1986 law actually raised it back up to 28%. President Bush allowed it to rise to 28.9% in 1990, and it peaked at 29.2% in 1996. It’s currently at only 23.8%. If Reagan’s 1986 tax plan is President Trump’s model as he (currently) claims, then the Capital Gains rate should not be cut. It should be raised to 28% where Reagan set it in 1986.

When Reagan took office, the corporate rate was 46%. Congress dropped it to 34% in 1986 and then adjusted it slightly to 35% in 1994—where it has remained since.  Again, if Reagan is President Trump’s model, why does he want to lower the corporate tax rate from its Reagan level all the way down to 20% or even 15%?

The Trump plan doesn’t follow the Reagan plan. It destroys it. If you want to uphold Ronald Reagan’s tax legacy, you and the rest of the GOP will reject the Trump tax plan.

Email #267: “simpler, fairer, and flatter”?

“This is our once-in-a-generation opportunity to deliver real tax reform for everyday hard-working Americans,” President Trump said last night as he began his push for Congress to pass legislation passed when it returns next week. Although the President sent a blue print of his tax plan to Congress in April, no bill has been drafted yet. But you did say a year ago in August:

“There is still a great deal of debate to be had on the details of a new tax code, but it is certain that it must be simpler, fairer, and flatter.”

The biggest change would be in income brackets. There are currently seven with rates ranging from 10% to 39.6%. The Trump plan would reduce that to three with rates of 10%, 25%, and 35%. This is an example of a “flatter” system. I’ve also heard some people describe it as “simpler,” though I’m not sure in what sense. Either there are brackets or there’s a single rate. If there are brackets, it doesn’t matter if there are 3, 7, 24 (as there were in 1980), or 56 (as there were in 1918). You skim down the row and find yours. Simple.

I’m much more concerned with the fairness of the plan and so how it would affect people’s actual taxes. Currently you are in the top income bracket. Your Congressional base salary is $174,000, but since your net worth is over 3.5 million, I assume you are declaring well over $418,400 each year, the bottom of the current highest tax bracket. So you would personally profit from the “flatter” Trump plan, but the overwhelming majority of your constituents earn a fraction of your income, and they would not.

Look at how the Trump tax cuts would affect your own staff. According to insidegov.com, your legislative director Lindsay Yates earned $61,667 in 2014; your district scheduler Jennifer Faulkner earned $70,500; your district director Debbie Garrett earned $74,000; and your communications director Beth Breeding earned $76,000. Lindsay, Jennifer, Debbie, and Beth were all in the third income bracket, $37,950 – $91,900, and are taxed at 25%. I’m in the same bracket. Under the Trump plan, we would all move to the new middle bracket, $37,500 to $112,500, but we would still be taxed at 25%. So no change.

In 2014, your deputy chief of staff Charlie Keller earned $119,00, and your chief of staff Pete Larkin earned $139,1000. They were both in the current fourth bracket, $91,900 – $191,650, and so were taxed at 28%. Under the Trump plan, they would both move to the top bracket, $112,500 +, and be taxed at 35%. For Charles, that 7% increase would mean paying $8,330 more. For Pete, it’s $9,737 more.

Charlie and Pete would also now be in your tax bracket. But instead of increasing, your tax rate would drop from 39.6% down to 35%. Again, pretending that you only earn $418,400, that 4.6% difference means you pay $19,246 less in taxes—double the difference of Pete’s tax increase. For someone in Trump’s proposed middle bracket, that’s some serious money. For someone in Trump’s bottom tax bracket, $0 – $37,500, that amount is life changing. For a millionaire like you, your accountant probably wouldn’t bother mentioning the change.

So under the Trump plan: Lindsay, Jennifer, Debbie, Beth, and I pay the same; Charlie and Pete pay more; and you, by far the wealthiest of us, pays less. While this “flatter” approach is certainly “easier” on you, how is it “fairer” for everyone else?

Email #200: “fishing expedition”?

I am pleased that the President voluntarily submitted a new, 98-page financial disclosure form months before he was legally required to and that the Office of Government Ethics released the form publicly this month. The inexactness of the form, however, emphasizes the continuing need for the President to release his tax records or provide other more detailed reports.

The form allows open-ended ranges, such as “over $50 million” for the value of one of the President’s golf courses. As a result, it reveals that the President owes at least $311 million in mortgages and loans, but possibly far more. (Of the 16 loans he reported, three are below $1 million, seven are below $25 million, one is below $50 million, and the remaining five loans are each above $50 million; how far above is unknown.) More importantly, the form does not reveal the identities of the President’s financial partners. We still do not know what individuals and institutions here and abroad have invested this money in his businesses. As a result, it is impossible to determine what business-related conflicts of interest the President has.

Although you previously identified oversight of the executive branch as one of your top priorities, you have refused requests by members of your own House Judiciary Committee to write to the White House requesting the President’s tax records. You said you could not support such a “fishing expedition.”

I appreciate that reasoning. Kenneth Starr turned the Whitewater real estate investigation into a “fishing expedition” when he deposed President Clinton regarding his unrelated affair with Monica Lewinsky. The House committee on Benghazi used its investigation to disclose Secretary Clinton’s inadequate email security, a topic which soon eclipsed the purpose of the probe.

Although you supported both of those previous “fishing expeditions,” I agree with your newly stated principle opposing such free-ranging probes. For that reason I ask that you lead a compromise approach to President Trump’s finances.

Could you request that the White House release copies of the President’s most recent taxes only to the House Judiciary Committee and only for a very limited period of time? The taxes would only be viewed by Committee members and with the explicit requirement that their content not be revealed publicly except in regard to specific topics identified in advance. More minimally, you could request the identities of all of the President’s business partners. This would avoid a “fishing expedition” while still accessing the most essential information for overseeing the President’s financial activity.

If you are unwilling to make these specific requests, what alternative approaches are you pursuing to oversee the executive branch regarding the President’s business conflicts of interest?