Demagoguery in the Tax Reform Debate

 

A demagogue is one who distorts the truth for political gain. While both political parties are guilty of this at times, the liberal media has allowed Democrats to use this technique much more under the Obama and Trump administrations.

Case in point is the current tax reform debate. You would think that all politicians would welcome tax relief for their constituents, especially the middle class, which is the goal of the Trump tax reform plan. But rather than let Trump score political points, they have chosen to demagogue the issue.

As I have discussed in recent posts, the latest proposal from Senate Republicans is the elimination of ObamaCare’s Individual Mandate (The Individual Mandate – Worst Tax Ever?). Rather than embrace this proposal, which seeks to eliminate a tax that unfairly and disproportionately targets the poor, Democrats are claiming it is a tax increase for the poor!

Avik Roy, writing in Forbes, exposes this misrepresentation or demagoguery. He explains that this myth comes from the distortion of a report by the Joint Committee on Taxation (JCT), a Congressional agency that estimates the fiscal impact of tax legislation. The JCT estimated tax bills for various income brackets if the Individual Mandate were repealed.

The Tax Increase Myth

The distortion comes for those in the $10,000 to $30,000 income bracket who are eligible for refundable tax credits – subsidies on the ObamaCare exchanges to purchase health insurance. If the Individual Mandate is repealed – and you voluntarily decline the subsidies – two things happen:

  • You get a tax cut because the mandate penalty has been eliminated
  • You don’t get the tax credit for buying health insurance

 

Roy explains this is not a tax increase – it is the voluntary foregoing of a tax credit. When this is taken into account, every income bracket sees their taxes reduced.

The Lost Health Insurance Myth

The second issue Democrats are distorting is the health insurance coverage after repeal of the Individual Mandate. The Congressional Budget Office (CBO) has estimated repeal of the Individual Mandate will result in 13 million fewer Americans having health insurance coverage. Senate Minority Leader Chuck Schumer has falsely claimed, “We’re kicking 13 million people off health insurance to give tax cuts to the wealthy.”

This is classic demagoguery – and Schumer is quite good at it. This simple statement has two falsehoods in it and both conjure up emotional reactions.

The first, “We’re kicking 13 million people off health insurance . . .” provokes the specter of a cruel government stealing the health insurance coverage of poor people without their consent. But this is patently false. All those people will still be able to purchase health insurance coverage, with the same subsidies they were eligible for before – but there will be no tax penalty if they choose not to purchase the insurance!

The fact that the CBO estimates 13 million Americans will refuse to purchase a subsidized insurance policy should tell you how valuable they consider these policies! The GOP plan is simply eliminating the heavy hand of the federal government that currently taxes you if you fail to purchase this insurance.

The full truth is the CBO has recently admitted its own projections are inaccurate. In a recent statement they said, “The preliminary results of analysis using revised methods indicates that the estimated effects of repealing the mandate on the budget and health insurance coverage would probably be smaller than the numbers reported in this document.”

They now estimate about 5 million people will drop out of the Medicaid program in 2026, even though the program is effectively free to the patient. This should tell you how valuable it is to be on Medicaid. Another 2 million are estimated will drop their employer-provided coverage after repeal – but that is entirely voluntary.

The second part of this false statement is “. . . to give tax cuts to the wealthy.” As stated above, no one is being kicked off health insurance, and certainly not in order to provide tax cuts for the wealthy. The main purpose of the tax reform is to stimulate the economy, to increase the number of good jobs and the wages of those jobs.

The main focus of the reform is tax cuts for the middle class (the poor are not paying any income taxes now), but tax cuts for upper middle class and the wealthy creates more jobs. These people are the small business owners that are the heart and soul of our economy – and the source of most new jobs. When they are over-taxed they avoid those taxes by changing their residences, moving their investments off-shore, and finding tax loop-holes. Everyone benefits when taxes are kept lower and the economy prospers. “A rising tide lifts all ships.”

Beware the demagogue who cares more about the political impact than the truth. It’s time the American people were told the truth.

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