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CBO: Senate Tax Plan Would Grow Debt, Benefit Wealthy More Than Poor

by Countable | 11.28.17

What’s the story?

In their latest analysis, the nonpartisan Congressional Budget Office estimates that the Senate GOP tax plan would benefit higher-earning taxpayers more than lower-income households.

The CBO report, released on Sunday, also concludes that the White House-backed Tax Cuts and Jobs Act would increase the deficit by $1.4 trillion over the next 10 years.

The current bill would remove the Obamacare individual mandate, which requires that taxpayers purchase healthcare or pay a penalty. If enacted, the CBO estimates "(t)he number of people with health insurance would decrease by 4 million in 2019 and 13 million in 2027."

The latest Senate proposal would permanently cut the corporate tax rate from 35 percent to 20 percent, temporarily reduce individual income taxes, and modify – or eliminate - a number of deductions.

Senate Republicans are still waiting on a "dynamic" score from the Joint Committee of Taxation, which will show the effects of the proposed tax cuts on the economy-at-large. This could help support a key claim of the Trump administration and congressional Republicans: that their plan will help pay for itself by stimulating economic growth.

Why does it matter?

The CBO score does little to assuage the concerns of Republican Sens. Ron Johnson of Wisconsin, Bob Corker of Tennessee, Susan Collins of Maine, Jeff Flake of Arizona, and James Lankford of Oklahoma, who have all criticized the current tax plan.

"In the current form, I wouldn't vote for it," Johnson said in a recent interview on CNBC's Squawk Box. "I want to get this thing fixed, and vote for pro-growth tax reform that makes all American businesses competitive globally."

Corker said he wouldn’t support any tax legislation that adds to the deficit in the long-run, and Collins has expressed reservations about including healthcare in a tax bill.

While the CBO does estimate that the number of people without insurance would increase by 13 million in 2027, it also notes that "nongroup insurance markets would continue to be stable in almost all areas of the country" over the next 10 years.

However, "average premiums in the nongroup market would increase by about 10% in most years of the decade … relative to the CBO's baseline projected. In other words, premiums in both 2019 and 2027 would be about 10% higher than is projected in the baseline."

The CBO report also concludes that the majority of tax breaks would go to the wealthiest Americans. In 2025, for example, the CBO estimates that people earning under $10,000 would lose $8.7 billion as a group while people earning $1 million or more would gain $15.8 billion as a group.

Senate Finance Committee spokeswoman Julia Lawless criticized the CBO report, saying in a statement:

"Unfortunately, this is not the first time CBO has vastly overestimated the impact of the deeply flawed individual mandate. And, for members concerned about the sunset date for individual tax cuts, Democrats will have a chance to make these strong middle-class tax cuts permanent on the floor."

What do you think?

Does the CBO score change your thoughts on the Tax Cuts and Jobs Act? Should the Senate proceed with the current version of the tax bill? Does it need further amendment on the Senate floor? Should it be stopped altogether? Hit the Take Action button to tell your senators, then share your thoughts below.

—Josh Herman

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(Photo Credit: kaarsten / iStockphoto)

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