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How Republicans misled the American public on their tax bill

From misleading statements to downright lies: three ways Republicans broke commitments on their tax bill.

House Speaker Paul Ryan Holds Weekly News Conference At The Capitol
House Speaker Paul Ryan is saying this is a middle-class tax cut. Not so fast.
Mark Wilson/Getty Images

Republicans have made a lot of promises on their tax bill.

They’ve said their bill will simplify the tax code by having American taxpayers file their taxes on a postcard, and that the tax cuts will pay for themselves, unleash corporate investment, and spark unprecedented economic growth. President Trump and America’s highest earners won’t benefit from the tax bill at all, he said.

“This is going to cost me a fortune, this thing, believe me,” Trump said. “This is not good for me. ... I think my accountants are going crazy right now.”

It’s a tax cut targeting the middle class, Republicans say. A typical American family of four earning an income of $73,000 will save $2,059.

“We’re not just putting higher-octane fuel in an old clunker of a tax car; we’ve proposed to drive a newer tax car that can beat and win against any country in the world,” Rep. Kevin Brady (R-TX), who chairs the tax-writing Ways and Means Committee, said.

Now President Donald Trump has signed the final tax bill into law and it’s clear that Republicans will fall short of these promises. True, they made attempts in earlier versions of the bill, and those provisions just didn’t make it through last-minute dealmaking. But some of the guarantees turned out to be straight-up lies.

The law doesn’t do much by way of simplifying the tax code. It retains seven tax brackets (rather than the four the House first passed), and preserves most of the current law’s tax breaks (including ones that help graduate students and teachers). And rather than granting a permanent tax cut to the middle class, the middle class gets a temporary one while corporations and the rich get the biggest benefits. An independent analysis shows that by 2027, 53 percent of taxpayers will see a tax increase — and 83 percent of the benefits will go to the top 1 percent.

Only time will tell if Republicans can deliver on their promise of unprecedented economic growth. But one thing is for certain: This tax law delivers on few of the commitments Republicans made to the American public.

This isn’t a middle-class tax cut — it’s a corporate tax cut

Top Republicans have been selling their tax bill — which gives corporations and businesses a massive tax cut, in addition to temporary changes for American individuals — as a middle-class tax cut.

An average American family of four will get keep an extra $2,059 of their income, House Speaker Paul Ryan has said in a tweet pinned to his Twitter feed.

While that’s true in the first year, the tax cut diminishes over time and ultimately disappears altogether in 2025, when Republicans sunset almost all the individual tax relief provisions. According to a new analysis from the Tax Policy Center, even when the bill offers an across-the-board tax cut, in the first years of its implementation upper-middle- and upper-class Americans would receive most of the benefits. Nearly two-thirds of the benefits go to the richest fifth of Americans in 2018, as Vox’s Dylan Matthews explained.

The Republican pitch has gotten a lot of blowback from Democrats, who have been pointing out that the tax bill primarily benefits the ultrawealthy and business shareholders.

“Spare us the bank shots; spare us the sarcasm and the satire,” Sen. Sherrod Brown (D-OH), who sits on the tax-writing Finance Committee, told Senate Finance Chair Sen. Orrin Hatch (R-UT) during the tax bill’s markup to make this point:

I think it would be nice just tonight to just acknowledge that this tax cut is really not for the middle class; it’s for the rich. And that whole thing about higher wages, well, it’s a good selling point, but we know companies don’t just give higher wages — they don’t just give away higher wages just because they have more money. Corporations are sitting on a lot of money. They are sitting on a lot of profits now — I don’t see wages going up.

Even some Republicans are making the point. Rep. Mark Sanford (R-SC), who voted for the Republican tax plan, said the GOP isn’t telling the truth about what this tax bill is.

“Fundamentally the bill has been mislabeled,” Sanford told Washington Post reporter Erica Werner. “From a truth in advertising standpoint it would have been a lot simpler if we just acknowledged really on this bill, which is it’s fundamentally a corporate tax reduction and restructuring bill, period.”

Sanford went on to say if that Republicans just messaged the tax bill accurately — as a corporate tax cut — then there could be a good-faith debate on its merits:

“You can argue the merits or demerits of doing that and what it will or won’t mean in terms of economic expansion and growth, but fundamentally if you look at the bulk of the bill, about two-thirds of it, it’s tied on the business side,” he said. “So there’s trimming, if you will, extras, that are built around indeed trying to help folks at different income levels, but that’s not what the core of what the bill is.”

Sanford’s comments go against Republican leadership’s line on the tax plan, and instead echo a Democratic talking point: This bill isn’t a middle-class tax cut, he said; it’s a corporate one.

Trump said the tax bill will cost him “a fortune.” Trump and his family will benefit hugely from the bill.

“Believe me,” Trump said. “This is going to cost me a fortune, this thing,” he insisted at a rally in Missouri earlier this year.

Trump and his administration have continued to insist that that high earners would not benefit from this tax bill. The “rich will not be gaining at all” with the tax bill, Trump said — a sentiment Treasury Secretary Steve Mnuchin repeated over the weekend.

This is not true. In fact, Trump will personally be gaining from this tax bill. A core change in the Republican tax bill is how it addresses “pass-through” businesses, like LLCs, partnerships, sole proprietorships, and S corporations — the Trump Organization, for example — that are taxed as personal income.

Current law puts the top individual tax rate at 39.6 percent. This bill reduces the rate to 37 percent, and gives pass-through entities a 20 percent deduction, extending it to real estate investors like Trump’s son-in-law Jared Kushner.

The Trump Organization is a large pass-through; it is a holding company for golf courses and hotels and pulls in about $9.5 billion in annual revenue. But because it is exempt from the corporate income tax, and its profits are instead taxed upon distribution to shareholders, this new tax break for pass-throughs is a huge win for the Trump family — and the many other businesspeople who structure their companies like this.

As Vox’s Dylan Matthews explained, there are some provisions in the proposal meant to prevent rich individuals from using this tax break as a way to shelter income, but they only limit the benefit in many cases.

“The overwhelmingly rich owners of these companies will still come out way ahead,” he writes.

Republicans say this simplifies the tax code — it doesn’t. They’re mostly taking credit for current law.

On the morning of the tax vote, Ryan’s office published a video of the speaker making the case for tax reform since he was in his 20s.

“If you want to give up all the loopholes, all those deductions, all the cats and dogs that are in the tax code and have a very simplified system so businesses, entrepreneurs and individuals can actually have a clean, easy postcard to fill out and move on,” Ryan proposed in 2010.

It’s a line the party continues to use, despite passing a tax bill that does very little to actually simplify the tax code. Despite early efforts from the House, which passed a version of the tax bill that condensed the current seven tax brackets to four and cut many of the deductions — like those for teachers’ supplies and high medical expenses — the final draft of the tax bill does no such thing.

As Jim Tankersley wrote for the New York Times, this tax bill “creates as many new preferences for special interests as it gets rid of”:

It will keep corporate accountants busy for years to come. And no taxpayer will ever see the postcard-size tax return that President Trump laid a kiss on in November as Republican leaders launched their tax overhaul effort.

The final talking points about the tax bill, which Republicans circulated with the legislative text released last Friday, takes credit for retaining a lot of the current tax law’s deductions.

“Provides support for graduate students by continuing to exempt the value of reduced tuition from taxes,” the talking points stated. “Continues to and expands the deduction for charitable contributions ... preserving the Adoption Tax Credit ... preserving the Child and Dependent Care Tax Credit.”

It’s a sudden reversal of what has been a decades-long campaign to simplify the tax code. Now success is “preserving” and “continuing.”