Everything about the Republicans’ tax plan was a mess. The package was rushed through Congress with minimal scrutiny and analysis; there were no substantive legislative hearings; some of the details were scribbled into the margins late at night; and every independent analysis pointing to trouble was ignored by the GOP majority.
The result, not surprisingly, is a new law filled with glitches, errors, and flaws. Politico reported over the weekend:
One inadvertently denies restaurants, retailers and others generous new write-offs for things like remodeling.
Another would allow wealthy money managers to sidestep a crackdown on lucrative tax breaks that allows them to pay lower taxes on some of their income than ordinary wage earners. A third creates two different start dates for new rules that make it harder for businesses to shave their tax bills.
There are dozens of other snafus, hitting everything from real estate investments to multinational corporations to farmers.
The law’s proponents will no doubt argue that in any major piece of legislation, mistakes are inevitable, even when lawmakers are responsible and take their time. It’s hardly surprising, the argument goes, that the Republican tax package will need some touch-ups.
Don’t believe it. “This is not normal,” Marty Sullivan, chief economist at the nonpartisan Tax Analysts, told Politico. “There’s always this kind of stuff, but the order of magnitude is entirely different.”
At this point, it’s tempting to look at the evidence and conclude that the Republican tax plan isn’t working, but the truth is a little more complex. The better question has long been, “For whom is the tax plan working?”
The New York Times reports that the new policy is working wonders for companies eager to purchase their own stock and increase the stock’s value.
Those so-called buybacks are good for shareholders, including the senior executives who tend to be big owners of their companies’ stock. A company purchasing its own shares is a time-tested way to bolster its stock price.
But the purchases can come at the expense of investments in things like hiring, research and development and building new plants – the sort of investments that directly help the overall economy. The buybacks are also most likely to worsen economic inequality because the benefits of stocks purchases flow disproportionately to the richest Americans.
The article added that Warren Buffett’s company, Berkshire Hathaway, announced over the weekend that it’s “enjoyed a $29 billion gain thanks to the new tax law.”
Tell us again, House Speaker Paul Ryan (R-Wis.), about that secretary in Pennsylvania who’s now getting an extra $1.50 per week thanks to the Republican plan.
Keep in mind, none of this comes as a surprise. Critics of the GOP tax package warned repeatedly, throughout the relatively brief process, that the Republican proposal wouldn’t just include serious errors, but also that it would encourage corporate stock buybacks, instead of capital investments.
So far, the evidence suggests those warnings were correct.