Jun.26

electoral-vote.com

Dem 47

   

GOP 53

The BBB Is Not Out of the Woods Yet

The One Big Beautiful Bill is still stalled in Congress. Not only are there differences of opinion within the Senate, but some representatives are claiming they won't vote for the Senate bill in its current form. Some of that may just be grandstanding, but both House moderates and Freedom Caucus members are making noises, albeit for different reasons.

Fundamentally, there are two serious problems that can't be papered over easily. First, the math doesn't add up. There is a double whammy here. Senate tax writers have written a bill that is hundreds of billions of dollars more expensive than the House bill. A new analysis by the Joint Committee on Taxation has the Senate bill costing $400 billion more than the House bill. It is hard to hide that under the rug. Also, the JCT is assuming that no changes are made to the current SALT limitation, since the Senate has scaled that back. But House moderates may refuse to accept the Senate bill on account of this. If the Senate accepts the House bill's increase of the SALT deduction to $40,000, that will add another $350 billion to the deficit, making the Senate bill $750 billion more expensive than the House bill. If it gets back to the House like this, the Freedom caucus may balk at it. This will be a very tough nut to crack and if half a dozen representatives vote no, the bill won't pass.

Second, the voters hate the bill. Multiple polls have shown that repeatedly and the more the voters know about it, the less they like it. A Fox News poll has 38% of registered voters for the bill and 59% opposed. This is true across all demographic, age, and income groups. Independents oppose it 22%-73%. Even white noncollege men oppose it 43%-53%. A Quinnipiac University poll has 27% of registered voters for it and 53% against it. Among independents, 20% support it and 57% do not. A KFF poll has 35% of adults in favor of it and 64% against it. A Pew Research poll has 29% of adults for the bill and 49% against it. An Ipsos poll found that 23% of adults are in favor of the bill while 42% oppose it. Averaging these polls we get 30% for it and 53% against it. That is pretty deeply under water.

While different people oppose different aspects of the bill, the more they know about its real-world effects, the less they like it. It is up to the Democrats to inform them, most likely after it passes, forcing the Republicans to own it in 2026. Here are some of the big issues:

• It Is Epically Regressive: The bill provides for big tax cuts for the rich and big service cuts for the middle class and poor. Calculations show that the top 20% of Americans by income will gain about 4% on the average while the bottom 20% will lose about 4% on the average. It shifts money up the tree. The Bush tax cuts of 2001 helped the rich even more, but were popular because they helped everyone, just the rich the most. This one is a straightforward transfer of wealth from the bottom 20% to the top 20% (with millionaires and billionaires getting the most from it).
  
  
• The Worst Is the Least Known: There are a few items in the bill that benefit the very rich that no one is talking about. One is a change to the estate tax. Under current law, the first $14 million of someone's estate ($28 million for couples) is not taxed. The bill raises the exemption to $15 million for individuals and $30 million for couples and it is indexed for inflation. The only people affected are people whose estate is worth more than $14 million for an individual or $28 million for a couple. The average working-class Republican voter doesn't make that in his whole life (50 years @ $66,000 is $3.3 million), let alone have that left over at the end. Only the richest of the rich (top 0.1%) benefit here, but they benefit big time. A couple with an estate of, say, $30 million or more would get an extra $2 million shielded from a 40% tax, which saves them $800,000 in estate taxes. How does this help Joe Sixpack?
  
  The second "secret" item is the pass-through business income tax. When a normal corporation makes a profit, it is taxed on the profit via the corporate income tax. Then the stockholders are taxed on the dividends they receive from the profit after taxes. With a pass-through business, the business pays no tax, only the owners. All you have to know is that 70% of the pass-through income goes to the top 1% of tax filers. Most law firms, group medical practices, and similar kinds of businesses are structured this way. The bill makes the current temporary 20% deduction a 23% deduction and makes it permanent. Together, these two "unknown" items will save the rich over $1 trillion over 10 years. In addition, the bill makes the current temporary top marginal tax rate stay at 37% rather than reverting to 39.6% if no bill passes. This helps the well off as well as the very rich. A married couple making over $750,000 benefits from this. Again, Mr. & Mrs. Sixpack are probably not pulling in $750K per year.
  
  
• Cuts to IRS: The Republicans are assaulting IRS. While this doesn't affect the taxes anyone legally owes, it certainly affects enforcement of iffy tax-shelter-type constructions. A typical factory worker probably doesn't own a corporation in the Cayman Islands that holds his stock portfolio and buys houses, cars, airplanes, and other goodies for him while skirting all the rules. With weakened enforcement, none of this stuff will even be investigated, let alone challenged. People whose entire income is subject to withholding of one sort or another can't play these games, but wealthy people can. If they think the chance of getting caught is close to zero and can afford the very best tax lawyers in the unlikely event they are caught, guess who ends up paying for this in the end?
  
  
• A Whack at Obamacare: Republicans have tried for years to repeal the ACA (Obamacare) with no success. This time they are trying to reduce the number of people who can use it, rather than killing it outright. Fewer people will notice this way. There are various procedural hurdles being created that will make getting coverage more difficult in various ways (e.g., proving you are disabled and unable to work) and will cut subsidies for those who qualify. These changes will affect low-income Americans far more than it will affect high-income Americans. All in all, projections show that the number of people expected to lose health insurance to be in the range of 10-16 million.

In short, the bill is a giveaway to rich people at the expense of ordinary people, and word is starting to leak out. If the bill passes in any form, Democrats would be well advised to shout its effects from the rooftops.

The bill is nowhere near getting through the Senate yet. At a conference lunch yesterday, multiple Republican senators informed Majority Leader John Thune (R-SD) that they were not ready to vote for the bill yet and wouldn't be until there were extensive changes. Sen. Thom Tillis (R-NC) wants major changes to the Medicaid part of the bill. He estimates the losses to his state at $38 billion and knows he will have a tough time defending a vote for it next year. He warned that the bill could cause Republicans to lose both chambers of Congress next year.

Sen. Susan Collins (R-ME) is concerned. In particular, she is concerned that the bill will reduce payments from insurance companies to rural hospitals and force some hospitals in her state to close. That could cost her reelection next year and she is not getting to "yes" until that (expensive) problem is fixed. She may have been egged on by a heavy ad campaign run by the Healthcare Education Project. This banner ad has been running on Politico for a while now and no doubt many other places.

Other senators complained about various things, but those two in particular are in tight races next year and probably mean it. In the end, they may get what they want, but that will make the math even worse and the deficit even bigger.

When the bill finally gets to the House, the deficit hawks, among them Rep. Thomas Massie (R-KY), are not going to be amused. Trump realizes that Massie is an even bigger problem than Rep. Chip Roy (R-TX). Massie not only opposes the Senate bill, but has threatened to introduce a resolution curtailing the president's warmaking powers. This has Trump absolutely seething. Trump is now going all-out to try to defeat the six-term congressman in a primary. It may not be so easy. Massie has survived attempts to be rid of him before, including a previous all-out attempt by Trump.

Massie's CV is a bit unusual for a fire-breathing right-wing dragon. He was born in West Virginia and grew up deep in Appalachia—specifically, in Vanceburg, KY, a town of 1,400 in northeast Kentucky, right across the Ohio River from Middle of Nowhere, OH. Despite all the disadvantages his background had, Massie went to M.I.T. (along with his high school sweetheart), where he got a bachelor's degree in electrical engineering and a masters in mechanical engineering. He took part in a worldwide solar electric car race in Arizona as part of the M.I.T. team that came in second. He also won multiple prizes at M.I.T. for his inventions, raised $32 million in venture capital for his tech startup after graduating, hired 70 people, got 24 patents, and sold the company in 2003. He is definitely not a dumb hillbilly. Thereafter, he became what is called a county executive in other states and then was elected to the House in a special election in 2012 when the incumbent suddenly resigned for family reasons.

Massie's district, KY-04, runs along the northern edge of the state, some of it in the Cincinnati suburbs. It is the richest district in the state and is 87% white and 68% urban. This is typically the profile of a Democratic district, but this is Kentucky, so it is R+18. He has beaten back challengers before, in part because he is extremely pro-Israel, and that brings in money from out of state. He will not be a pushover for Trump. (V)