Even as congressional Republicans made good on their promise to deliver a massive tax overhaul bill to President Donald Trump this week, it’s assuredly not the last time Nevadans will hear about the bill.
Both major candidates for the state’s 2018 U.S. Senate race — Republican Sen. Dean Heller and Democratic Rep. Jacky Rosen — have staked out clear positions on the tax legislation signed by Trump on Wednesday.
Rosen has been adamant in her criticism of the bill, not only voting against the legislation but publishing op-eds, issuing multiple statements and even having her campaign launching ads attacking Heller’s support of the proposal. Heller has been an unabashed supporter of the measure, appearing behind Trump at an event celebrating the bill’s passage Wednesday and boasting about helping write the bill on social media.
In a speech on the House floor shortly before the tax bill came up for a vote, Rosen doubled down on her criticism of the bill.
“Let’s be clear: this monstrosity of a bill would eventually slam many of Nevada’s hardworking families with a tax increase while adding more than $1 trillion dollars to our national debt,” she said. “And to make matters worse, the Senate version of this bill would spike health-care premiums and cause millions to lose their health-care coverage — all so billionaires and giant corporations can receive an unnecessary tax cut.”
The tax bill, passed under budget reconciliation rules and thus only requiring a simple majority in both the Senate and House to pass, contains a variety of major changes to the tax code that promise to have a major economic impact. In addition to expiring decreases in income tax rates, the bill doubles the standard tax deduction, permanently drops the corporate income tax from 35 percent to 21 percent, and repeals the individual mandate requiring most people have health insurance.
Outside of some heated rhetoric, Rosen’s criticisms are largely on the money and based on reasonable projections of what the bill will do.
Few congressional “scorers” of tax legislation or think tanks have argued against the assertion that the wealthiest Americans would benefit the most from the tax bill.
In a December analysis published, the nonpartisan Nevada-based Guinn Center for Policy Priorities found that the net effect of the tax bills on the state was “difficult to discern,” but that most of the benefits would go to the state’s highest income earners.
Though all taxpayers regardless of income would see a cut in 2019, the majority of the cuts would benefit the richest Nevadans. The group estimates that the top 1 percent of income earners would see an estimated $79,810 tax break if the bill passes, while the bottom 60 percent of income earners would see a break of $480. The average tax change for all taxpayers would be roughly $2,130, good for an approximate 2.1 percent bump in pre-tax income.
But those benefits would evaporate by 2027 (though the analysis assumes the income tax cuts expiring in 2025 and not being renewed). The Guinn Center estimated that the bottom 60 percent of taxpayers would see a small to moderate tax increase by 2027, while the benefits for higher income taxpayers would be generally smaller. The top 1 percent of taxpayers would see a cut of slightly more than $13,400, an 83 percent decrease from their estimated cut in 2019.
Although most analyses of the tax bill don’t delve into state-specific effects, most agree that the benefits will largely flow to the wealthiest Americans. An analysis by the Tax Policy Center found that a large percentage of households will pay an average $1,600 less in income taxes next year.
But the study also found that most of the immediate and long-term benefits will flow to the richest Americans. In 2018, the report indicates taxpayers with incomes between $308,000 and $733,000 would see the biggest percent change in after-tax income, with an average tax cut of $13,500, or 4.1 percent more in after-tax income.
The report, which assumes the income tax changes will sunset and not be renewed in 2025, assumes that most of the benefits from the bill will evaporate by 2027, with roughly 83 percent of the total benefits going to the top 1 percent of taxpayers (largely due to other tax structural changes in the bill.)
Still, even by 2027 and with the tax cuts expiring, the TPC report found no significant change to individual tax rates will take place for those in the lower and middle income sectors. The bottom 80 percent of taxpayers are projected to either see a 0.1 percent or no increase in tax rates by 2027
Other aspects of the bill will largely benefit high-income earners, including an increase in exemptions for the “alternative minimum tax,” typically charged to high-income taxpayers who use tax deductions and other changes to avoid paying taxes.
The Guinn Center analysis found that only 14,690 tax returns in the state (out of 1.3 million filed) reported paying the tax in 2015, and those that did were primarily in higher income brackets. Those in the highest income bracket in the analysis with incomes over $200,000 reported paying $97 million in that tax category, more than 14 times the amount paid by the next lowest tax category.
The vast majority of economic researchers say the tax bill will increase the national debt, though the number varies depending on which analyst is looking at the bill.
First, official congressional scorekeepers estimate that the bill’s price tag will easily eclipse $1 trillion. The Congressional Budget Office estimates the measure will result in a $1.45 trillion increase in the deficit over the next 10 years, but does not include any macroeconomic effects in their analysis. The Joint Committee on Taxation also estimated that the bill will result in a net $1.456 trillion increase in the deficit over a 10-year period.
Independent economists also reached similar conclusions, though the exact impact on the deficit varied. The conservative-leaning Tax Foundation estimated the bill would result in a $448 billion price tag after accounting for economic growth over a 10-year period, while the Wharton School at the University of Pennsylvania estimated a smaller bump in economic growth that would translate to a $1.9 to $2.2 trillion increase in the federal debt over the next two years. The Tax Policy Center estimated the bill would increase the federal debt by about $1.8 trillion by 2027, including macroeconomic impacts.
Included in the tax bill is a repeal of the Affordable Care Act’s individual mandate, the requirement that most people purchase health insurance.
Rosen’s claim about causing millions to lose insurance and a “spike” in premiums likely comes from a Congressional Budget Office report in November that estimated the number of people without health insurance would increase by 13 million by 2027. The CBO report also estimated that the federal budget deficit would be reduced by about $338 billion over a decade if the mandate were repealed.
The CBO also projected that premiums would rise by about 10 percent in most years of the coming decade with a repeal of the mandate put into effect. That analysis is also made independent of other changes that the Trump administration has made in terms of health insurance — namely the ending of cost-sharing reduction payments to insurance providers to offset the cost of premiums for poorer people, which Nevada officials estimate could raise premiums by more than 31 percent.
Though many groups have relied on and used the CBO’s projections, other analysts say the mandate has less of an effect on insurance rates than initially believed. A report by S&P Global Ratings projected that more people would continue to sign up for health insurance even if the mandate is repealed, as the “intrinsic financial incentives” still in place under the Affordable Care Act would continue to drive individuals to purchase health insurance.
In a speech on the House floor, Rosen claimed the Republican-backed tax bill would “eventually slam” Nevada families with a tax increase, while adding $1 trillion to the national debt and causing millions to lose health insurance.
Just as with other fact checks on the tax bill, it’s necessary to state that projections are just that — projections. The U.S. economy, health insurance enrollment, tax collections and the federal deficit will not operate in a vacuum over the next 10 years, and it’s difficult to predict just about anything over a 10-year cycle.
That said, Rosen’s criticisms do cite from respected economic analysis of the bill. Although it’s doubtful that most Nevada families would be “slammed” by a tax increase when the cuts expire, she’s correct that most of the benefits flow to the wealthiest taxpayers. The individual mandate repeal’s effects and pressure on premiums are accurately taken from the Congressional Budget Office, and the claim over adding to the federal debt is in line with many other projections..
Rosen accurately quotes from reports and analysis that we have no reason to doubt, which is why we rate her statement Honest as Abe.