Breaking Down the BBB Bill

Dean Baker critiquing and breaking down Tr__p’s BBB Bill

That’s the question Republicans in Congress will be debating as they struggle to put Donald Trump’s “Big Beautiful Bill (BBB)” in final form to pass and send to his desk. The essence of the bill should be well known at this point.

It extends Trump’s 2017 tax cuts past their scheduled expiration date at the end of the year.

This matters little to most of the country, who did not see much benefit from the 2017 tax cut. However, it is big bucks to the rich and very rich. Each were recipients of a large tax cut from the 2017 bill. The bill also includes some extra gravy for the rich and very rich. 

• For example, it has a provision that allows owners of businesses to have much or all of their income taxed at the lower capital gains rate of 20 percent, instead of the 37 percent rate that they would otherwise pay. Trump is also proposing to cut I.R.S. staffing in half. He has also eliminated the tax enforcement division at the Justice Department. This means Trump and Republicans are effectively putting up a huge neon sign saying “Taxes are Voluntary” for rich people across the country.

• Just to be clear, average Joe and Jane types out there should not be confused and think this means they won’t have to pay their taxes. Most of us have our taxes deducted from our paychecks. That will still happen. Maybe some of these people get some small change in interest or dividend income they can hide, but for the vast majority of ordinary people, shutting down enforcement won’t reduce our tax bill even if we wanted to cheat. For the rich and very rich, it is a very big deal.

• There are also the “populist” tax cuts in the bills. The most famous is making tips tax free. That’s good news for a small number of relatively highly paid tipped workers in Las Vegas, but pretty much irrelevant for the bulk of people waiting on tables in restaurants. These people generally pay little or no tax already. Depending on the way the final bill is structured, it could actually cost these workers money by reducing the money they get from the earned income tax credit.

• The effort to make Social Security benefits tax free turns out to be a nice bonus for higher income retirees but means little or nothing to the bulk of those who could use help. The bill increases the standard deduction for people over age 65 to 6,000. Most seniors either pay no income tax or are in the 10 percent tax bracket, which means it will give them $600 a year. Higher income seniors in the 25 percent bracket would pocket $1,500 a year.

• The proposal pushed by Senators Bernie Sanders and Elizabeth Warren, to increase Social Security benefits by $2,400 a year, would do far more to help seniors who are struggling. This could phase out so as not to benefit those already comfortable.

• Making overtime tax free effectively turns the current overtime law on its head. The current law will discourage employers from requiring workers to put in long hours and to instead hire more workers. The 50 percent wage premium is a penalty for employers who insist workers put in long hours. (Overtime in almost all cases is mandatory.)

• The BBB will instead subsidize long hours by creating a zero-tax bracket for extra hours. In addition to encouraging tax gaming (remember, no one polices tax fraud anymore), this will mean employers can require workers to put in 50 and 60 hours a week and to shut up and eat their tax break. That’s not exactly family friendly. If we want to help workers putting in long hours the obvious route would be to raise the wage premium for overtime from 50 percent to 75 percent or even 100 percent. This would be money out of the employers’ pockets, not the taxpayers’ pockets.    

• There also is some additional spending in the BBB. It will increase military spending and provide a huge increase in funding for the Department of Homeland Security. This means Secretary Kristi Noem will have more money to hire plains clothes agents, who grab people off the streets and out of workplaces, to ship off to wherever they feel like. Noem claims she hires snowflakes, who have to remain anonymous, unlike the hundreds of thousands of state and local police officers across the country who wear uniforms and show identification.

• This will help keep us safe from gardeners, restaurant workers, roofers, and other people who have been menacing the country by doing hard work at low pay. The funding will also pay for more prisons for Noem to keep these people in while they decide what to do with them.

• The best part is how they propose to offset the cost of the tax cuts and increased spending. This is where the dying comes in. They propose large cuts in Medicaid, subsidies in the Affordable Care Act, and food and nutrition programs for low-and moderate-income households. According to the Congressional Budget Office, more than 10 million people will lose health insurance coverage from the BBB.

• People without insurance coverage don’t stop getting sick or having accidents, they just get less medical care. This means many conditions like cancer will go untreated until they reach a point where they can no longer be treated. 

• The Republicans know this sounds awful, so they just lie and say no one will lose their Medicaid. This is absurd. The Congressional Budget Office is projecting close to $800 billion in savings (roughly 10 percent of Medicaid spending and 1 percent of the total budget), which the Republicans are assuming in their analysis of the bill, based on the assumption that close to 10 million people will lose benefits.

• To be clear, the Republicans are making their cuts in the sleaziest possible way, they are increasing the paperwork required to get benefits. The most important item in this category is a work requirement. As it stands, the vast majority of people getting Medicaid already work. Past experience shows that work requirements don’t increase work, but they do cause people who don’t handle the paperwork properly to lose coverage.

• To appreciate the true sleaziness of this route for cutting benefits remember that Republicans have placed a high priority on reducing regulatory paperwork for businesses, saying that it creates an unnecessary burden. When it comes to businesses that have lawyers, Republicans are very sensitive to the difficulties imposed by complying with regulations. However, when it comes to lower income people, many of whom have limited education, the Republicans are very happy to impose more paperwork. 

• And experience shows many will fail to complete the necessary forms correctly. This is the basis for the CBO analysis showing over 10 million people losing coverage and the government saving $800 billion over the decade on Medicaid.   

• Throwing people off health insurance to pay for tax breaks to the rich sounds pretty awful, which is why Republicans lie about what they are doing, but those of us not in on the joke need to deal with the truth, not Trump’s reality TV show version.

The truth about the BBB is pretty awful, but at least passing the bill will make Donald Trump happy.

“Trump’s BBB Slashes Medicaid and Rewards the Rich,” CEPR