The Big Winners from the ‘Small Business’ Tax Cuts

By Yuval Rosenberg and Michael Rainey The Biggest Winners from the ‘Small Business’ Tax Cuts Republicans insisted that their tax cuts on pass-through entities were meant to reduce the tax burden on small businesses and thus spur job creation. But updated estimates from the Joint Committee on Taxation in advance of a Senate Finance Committee hearing on the new tax law Tuesday afternoon, show that the “small business” tax cut will largely benefit the wealthy — many of whom [aren’t “job creators.”]( According to the new estimates, 44 percent of the new tax benefit for pass-through business owners, some of whom can now deduct 20 percent of their business-related incomes, goes to households earning $1 million or more a year, The Wall Street Journal’s Richard Rubin [points out](. (That’s $17.8 billion in benefits for those high-income households, out of a total of $40.2 billion for all income groups.) The new estimates include projections from the Congressional Budget Office that were not available to the JCT back in February, when the committee produced its initial analysis. Drilling down further, more than half of the pass-through benefits ($21.4 billion, or 53 percent) go to households earning $500,000 and higher, and more than three quarters ($30.8 billion, or 77 percent) goes to households earning $200,000 and higher. At the opposite end of the income spectrum, households earning less than $100,000 are expected to claim about 7 percent of the benefit ($3 billion). The rules around the new pass-through deductions have been criticized for being both confusing and unnecessary (see NYU law professor Daniel Schaviro’s withering take [here](. Rubin attempted to explain some of the basics in a new video on Monday, which you can review [on YouTube](. The JCT tables are available [here]( and live video of Tuesday’s Senate Finance Committee hearing, entitled “Early Impressions of the New Tax Law,” will be available [here]( with a scheduled start time of 2:30 p.m. EST on Tuesday. Chart of the Day The Commerce Department is scheduled to issue its advance estimate of first-quarter GDP on Friday, and the report is widely expected to show economic growth slowed over the first few months of the year. Economists polled by Macroeconomic Advisers now expect 1.7 percent growth, down from 2.9 percent for the fourth quarter of 2017 — and significantly lower than previously forecast. “There is little reason to fret the economy is truly flagging,” [writes]( The Wall Street Journal’s Justin Lahart. “Still, the first quarter was [when the tax cut took effect]( raising the take-home pay of many Americans in addition to sharply reducing corporate taxes. That ought to have boosted consumer spending, but apparently it wasn’t enough to offset the temporary factors weighing on the economy in the first quarter.” Tax Cuts Take a Toll on State and Local Public Servants Teachers in Arizona have announced they will go on strike this week, joining educators in Oklahoma, West Virginia and Kentucky protesting low wages and insufficient school funding in their states. But school teachers aren’t the only public employees who say they are underpaid and underappreciated. According to a New York Times piece Monday, public servants around the country — and there are about 20 million of them — are losing their grip on what was once a solidly middle-class way of life. In the decades following World War II, becoming a teacher, policeman or bus driver was seen as a reliable ticket to a secure economic future, Patricia Cohen and Robert Gebeloff write. But now public employees across the country face increasing workloads, stagnant wages and insecure financial futures. And in the last few years, state and local governments haven’t been hiring much. As a result, the percentage of public employees in the overall workforce has fallen to levels not seen since the late 1960s. State governments are being squeezed from all sides, according to the Times. Anti-tax activists have succeeded in many states, including some of the states experiencing protests over teacher pay, reducing the pool of available funds for all kinds of public spending. At the same time, retiring baby boomers are consuming an increasing share of what’s left through pension and benefit packages that were never properly funded. The Times piece includes some telling personal stories, including that of Eldon Johnson, a 40-year-old who cares for special-needs children in Norman, Oklahoma. Johnson earns $12.50 an hour, pay so low that he has to work another full-time job just to make ends meet. “There’s no way I could make it without a second job, unless I lived in a box, and maybe had a moped,” Johnson told the Times. [Read the full analysis at The New York Times](. Why Republicans Won’t Even Try to Pass a Budget for 2019 Budget expert [Stan Collender at Forbes]( slams Republicans for not even attempting to pass a budget for the fiscal year that starts October 1. “The House and Senate Budget Committees only have one job -- to adopt a budget resolution -- and this year they are unwilling, incapable or just stomping their feet and refusing to do what the Congressional Budget Act specifically requires of them,” he writes. The politics at play: “A vote on a budget resolution would either force congressional Republicans to go on record in favor of the bigger-than-life deficits or vote against a budget that authoritatively projects the impact of the tax cuts and spending increases most of them just approved, both of which would be politically problematic. Their third choice -- vote for a budget with greatly reduced deficits because of proposed cuts in Social Security, Medicare and Medicaid -- would be even more politically unpalatable.” Fiscal Flashes Bernie Sanders to Propose Plan Guaranteeing a Job for Every American: Sen. Bernie Sanders (I-VT) is preparing to announce a plan for the federal government to guarantee a job paying $15 an hour and providing health-care benefits to every American “who wants one or needs one.” The jobs would be on government projects in areas such as infrastructure, care giving, the environment and education. The proposal is still being crafted, and Sanders’ representative said his office had not yet come up with a cost estimate or funding plan. Sen. Kirsten Gillibrand (D-NY) last week [tweeted]( support for a federal jobs guarantee, but Republicans have long opposed such proposals, saying they would cost too much. ([Washington Post]( Trump’s Drug Price Speech Delayed: President Trump has postponed a planned speech on reducing prescription drug prices that had been scheduled for Thursday. The White House did not say why the speech was pushed back or when it would be rescheduled. ([Reuters]( Republicans Hope for Quick Action on Appropriations Bills: “With Sen. Richard Shelby (R-Ala.) taking over the Senate Appropriations Committee, members of that panel are schedule to hold a private meeting Monday afternoon to discuss ways to move spending bills quickly to the Senate floor, according to GOP and Democratic aides. ([Politico]( The High Cost of Child Poverty: Childhood poverty cost $1.03 trillion in 2015, including the loss of economic productivity, increased spending on health care and increased crime rates, according to a recent study in the journal [Social Work Research](. That annual cost represents about 5.4 percent of U.S. GDP. “It is estimated that for every dollar spent on reducing childhood poverty, the country would save at least $7 with respect to the economic costs of poverty,” says Mark R. Rank, a co-author of the study and professor of social welfare at Washington University in St. Louis. ([Futurity]( Send Us Your Tips and Feedback: Email yrosenberg@thefiscaltimes.com and follow me on Twitter [@yuvalrosenberg](. Follow The Fiscal Times [@TheFiscalTimes](. Deficit Owls Say You Shouldn’t Give a Hoot About $1 Trillion Budget Shortfall As warnings rise about the Congressional Budget Office’s projection that the federal budget deficit is on pace to top $1 trillion in 2020, The Washington Post’s Jeff Stein on Friday highlighted a small but pugnacious group of economists who argue that deficit spending isn’t the threat it’s so often made out to be. The headline on his piece: “These economists say a $1 trillion deficit is just a good start.” Those economists are mostly proponents of a heterodox economic school called “Modern Monetary Theory,” which holds, among other things, that governments that control their own currency, as the U.S. does, should never default. They call themselves “deficit owls,” a term [coined by Professor Stephanie Kelton]( an economic adviser to Sen. Bernie Sanders. “Deficit spending, they say, has given the government extra money to fund social services, stimulate the economy, and react to natural disasters,” Stein wrote. “And all the dire warnings of a coming crisis, they say, are, at best, well-intended alarmism — and, at worst, a sneak attack on welfare, Medicare and other progressive priorities.” [Read Stein’s piece]( for a comprehensive overview of the arguments and counter-arguments. And check out economist [Jared Bernstein’s take]( on where he disagrees with the owls — “Part of the problem is that they’re just way too sure they’re right,” he says. “Or, more precisely, they’re too sure that the fact that they’ve been right about the past means they’ll be right about the future.” — how politics plays into the debate and why we still need to have a more robust national discussion about when and why deficits matter. News - [Public Servants Are Losing Their Foothold in the Middle Class]( – New York Times - [Work Requirements Give Republicans Cover to Expand Medicaid]( – U.S. News - [A New Tax Break for Poor Neighborhoods Could Benefit Luxury Developers]( – Bloomberg Businessweek - [If Treasuries Reach 3%, That Would Be Big. Here's Why]( – Bloomberg - [Tax Bill Will Slash by Half the Number of Homeowners Using the Mortgage Deduction]( – CNBC - [Why a 20% Raise Isn't Enough for Arizona Teachers]( – CNN Money - [Five Things to Expect from President Trump’s (Delayed) Drug Price Speech]( – MarketWatch - [3 Red States Could Put Medicaid Expansion on the Ballot This Year]( – Vox - [The Richest 1% Are on Track to Control Two-Thirds of the World’s Wealth by 2030]( – MarketWatch - [The Hardest Job in the World]( – The Atlantic - [Royal Baby Fever Is Sweeping Britain, and the Photos Do Not Disappoint]( – Washington Post Views - [Why Democrats Must, for the Sake of the Future, Repeal and Replace the Republican Tax Cut]( – Jared Bernstein, Washington Post - [America Is Going Even Deeper into Debt]( – Mark Whitehouse, Bloomberg View - [The Global Economy Is on the Mend — Unless Debt Dooms the Recovery]( – Robert J. Samuelson, Washington Post - [The Republican Tax Cut Is a Dud]( – Jeff Spross, The Week - [A Time for Big Economic Ideas]( – David Leonhardt, New York Times - [On Drug Pricing, Trump Could Rely on Bluster and Bad Ideas. But There’s a Better Alternative]( – David Beier and John Osborn, STAT - [Keep Fighting for Health Insurance for All]( – Seattle Times Editorial Board - [Banks Bask in Tax Reform Gains, but They Should Plan Ahead]( – Bert Ely, The Hill - [How to Avoid a Retirement Disaster]( – Barry Ritholtz, Bloomberg View Copyright © 2018 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website, thefiscaltimes.com. Our mailing address is: The Fiscal Times 712 Fifth AvenueNew York, NY 10019 [Add us to your address book](//thefiscaltimes.us1.list-manage.com/vcard?u=40d2c5373681f5cd830b6d823&id=714147a9cf) If someone has forwarded this email to you, consider signing up for The Fiscal Times emails on our [website](. 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