Category Archives: Default

New doggerel, inspired by the tax act?

There’s a bit of old doggerel that I remember from Kurt Vonnegut’s Slaughterhouse Five, that goes something like this:

My name is Yon Yonson
I live in Wisconsin
I work in a lumberyard there
The people I meet when I walk down the street
Ask my name and I say:
My name is Yon Yonson
I live in Wisconsin
I work in a lumberyard there
[ETCETERA AD INFINITUM]

In the aftermath of the 2017 tax act, I think we are ready for a new version. But I am still working on the fifth line.  Here’s what I have so far:

My name is Ron Johnson
I represent Wisconsin
My millions from passthroughs are there
The people I meet when I walk down the street
Ask which senator threatened to vote against the tax bill unless tax benefits for passthroughs were               expanded, and I say:
My name is Ron Johnson
I represent Wisconsin
My millions from passthroughs are there
[ETCETERA AD INFINITUM]

The Act with no name

Here is the start of the 2017 tax bill, taken from the Conference Report:

Sec 11000. SHORT TITLE, ETC.
(a) SHORT TITLE.-This title may be cited as the “Tax Cuts and Jobs Act.”
(b) AMENDMENT OF 1986 CODE.-Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of … a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
Why am I bothering you with this? Just bear with me here for a moment.
Here is the start of the 2017 tax bill, taken from the final enrolled act:
Sec 11000. SHORT TITLE, ETC.
(a) AMENDMENT OF 1986 CODE.-Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of … a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
There is no section 11000(b) any more, and old (b) has of course become (a).
So what happened in the interim? They took out the bill’s title! It has no name now! (But there are still later statutory references to the Tax Cuts and Jobs Act, even though this has ceased to be a defined term.)
I specifically looked for this omission, when I got an electronic copy of the final bill, because I had heard that the Senate parliamentarian made them strike the name as a non-germane amendment.
This means absolutely nothing substantively, but perhaps I can be forgiven for finding it hilarious. They were in such a heedless rush that the bill ended up without a name! Of course, it doesn’t deserve a name.

Here’s a “dynamic” effect of the 2017 tax bill that we CAN expect to see

As I’ve noted in prior posts, one thing the tax bill does is strongly encourage non-employees to incorporate their businesses, including personal service businesses, and pay tax at only 21% federal. Even if they end up paying a second level of tax upon withdrawing their funds, there is almost no downside. And if they don’t need to withdraw the money directly, they may never end up paying that second level of tax. And Congress openly invited this result by providing that the tax rate for personal service corporations will be 21%, or the same as the general corporate rate.

Suppose a lot more people incorporate than the Joint Committee on Taxation anticipated when it scored the legislation. Then the overall revenue losses will be even bigger than the JCT predicted. But “corporate” revenue will be higher than forecast, due to the unanticipatedly high shifts.

One thing you can be certain of, if this happens: proponents of fake and overstated “dynamic” scoring will cherry-pick this number, and claim that it vindicates them. In short, an oversight that loses revenue will be treated by them as evidence that tax cuts actually do raise revenue. Of course, this requires staying tightly focused on corporate revenues, not overall revenues, but I am sure that this constraint will prove no difficulty.

Any good academic study of the revenue effects of the 2017 bill will, of course, take this issue into account. But competent and good-faith academic studies are not what I am talking about here.

UPDATE: BTW, this point was made to me by the WSJ’s Richard Rubin. Didn’t want to mention him by name without his approval.