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Your Name:____________________________OPTIONAL DUE ________________________________Directions: Read the editorial and then short answer the questions that follow. You may write on this.It Started as a Tax Cut. Now It Could Change American LifeThe tax plan has been marketed by President Trump and Republican leaders as a straightforward if enormous rebate for the masses, a $1.5 trillion package of cuts to spur hiring and economic growth. But as the?bill has been?rushed?through Congress with scant debate, its far broader ramifications have come into focus, revealing a catchall legislative creation that could reshape major areas of American life, from education to health care.Some of this re-engineering is straight out of the traditional Republican playbook. Corporate taxes, along with those on wealthy Americans, would be slashed on the presumption that when people in penthouses get relief, the benefits flow down to basement tenements.Some measures are barely connected to the realm of taxation, such as the lifting of a 1954?ban on political activism by churches?and the conferring of a?new legal right for fetuses?in the House bill — both on the wish list of the evangelical right.With a potentially?far-reaching dimension, elements in both the House and Senate bills could constrain the ability of?states and local governments?to levy their own taxes, pressuring them to limit spending on health care, education, public transportation and social services. In their longstanding battle to shrink government, Republicans have found in the tax bill a vehicle to broaden the fight beyond Washington.The result is a behemoth piece of legislation that could widen American economic inequality while diminishing the power of local communities to marshal relief for vulnerable people — especially in high-tax states like California?and New York, which, not coincidentally, tend to vote Democratic.All of this is taking shape at such extraordinary velocity, absent the usual analyses and hearings, that even the most savvy Washington lobbyist cannot be fully certain of the implications. Mr. Trump and the Republican leadership in Congress — stymied in their efforts to repeal Obamacare, and short of legislative achievements — have signaled absolute resolve to get a tax bill passed by the end of the year. As the sense has taken hold that Washington is now a trading floor where any deal is worth entertaining so long as it brings votes, interest groups have fixed on the tax bill as a unique opportunity to further their agendas.“There’s a Christmas-tree aspect to the bill,” said C. Eugene Steuerle, a Treasury official during the Reagan administration and now a senior fellow at the Urban Institute. As an example, he cited the?provisions?in the House bill designed to?appeal to the religious right. “People want to add certain things, and if they don’t cost a lot, it’s a way to buy in agreement,” Mr. Steuerle said.Economists and tax experts are overwhelmingly skeptical that the bills in the House and Senate can generate meaningful job growth and economic expansion. Many view the legislation not as a product of genuine deliberation, but as a transfer of wealth to corporations and affluent individuals — both generous purveyors of campaign contributions. By 2027, people making $40,000 to $50,000 would pay a combined $5.3 billion more in taxes, while the group earning $1 million or more would get a $5.8 billion cut, according to the?Joint Committee on Taxation and the Congressional Budget Office.“When you put all these pieces together, what you’re left with is we are squandering a giant sum of money,” said Edward D. Kleinbard, a former chief of staff at the Congressional Joint Committee on Taxation who teaches law at the University of Southern California. “It’s not aimed at growth. It is not aimed at the middle class. It is at every turn carefully engineered to deliver a kiss to the donor class.”In a recent University of Chicago?survey of 38 prominent economists?across the ideological spectrum, only one said the proposed tax cuts would yield substantial economic growth. Unanimously, the economists said the tax cuts would add to the long-term federal debt burden, now?estimated?at more than $20 trillion. HYPERLINK "" It’s virtually impossible to fully understand, let alone keep up with, the flood of proposals, amendments and analyses that continue to pour out. Here are some of the big-picture ideas to keep in mind as this political sausage is being made.If the package does have a guiding philosophy, it is a return to trickle-down economics, an enduring story line in which the wealthy are supposed to spend and invest their tax breaks, creating jobs and commercial opportunities for everyone else. As President Ronald Reagan slashed taxes in the 1980s, he argued that citizens, not bureaucrats, should decide how to spend their money. President George W. Bush bestowed enormous tax cuts on the affluent.But the trickle-down story has yet to achieve its promised happy ending. Nonetheless, Republicans are staging a trickle-down revival. “Either it’s a religious belief, a belief where no amount of evidence would change that, or they are using the argument cynically and they just want more money for themselves,” the economist Joseph E. Stiglitz, a Nobel laureate, said.The meat of the package is a permanent lowering of the corporate tax rate, to 20 percent from 35 percent, which business leaders have long wanted. Proponents assert that this would prompt multinational companies to expand operations in the United States.“We’ve been bleeding corporate headquarters and production for a long time,” said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and now president of the American Action Forum, a nonprofit that promotes smaller government.But recent history suggests that when corporations get tax relief, they find abundant uses for money that do not involve paying higher wages. They give dividends to shareholders and stock options to executives. They stash?earnings in tax havens. In 2004, Congress invited American corporations to bring home overseas earnings at a sharply reduced rate, pitching it as a means of bolstering investment. But the corporations spent as much as 90 percent of their windfall buying back their shares, according to Bureau of Economic Analysis research. If Congress bestows fresh relief on major businesses, signs suggest a similar result. Many companies are enjoying record profits. Those in the Fortune 500 had $2.6 trillion salted away overseas as of last year. HYPERLINK "" As for education and health care, the tax cut package, for instance, could trigger rules mandating?cuts to Medicare, the government health care program for seniors, the Congressional Budget Office warned. Some 13 million people could lose health care via the?elimination of a key plank of Obamacare. Insurance premiums are also expected to rise by 10 percent. “This tax bill is a grand deception,” said Arnold Hiatt, the former chief executive of Stride Rite, which makes children’s shoes. “It hurts the most vulnerable, and hurts health care and education, which are essential for a healthy economy.”The proposals break from seven decades’ worth of federal efforts to broaden access to higher education. The House or Senate bill includes provisions ending the deductibility of tuition waivers for graduate students, repealing the deduction for interest paid on student loans and taxing university endowments. The endowment tax, in particular, threatens the ability of low-income students to pursue college and graduate studies, said Ron Haskins, a senior fellow at the Brookings Institution. Proceeds from endowments subsidize students from lower-income families, while allowing students across the board to graduate with less debt. “This plan is very far-reaching,” he added, “but there hasn’t been much of a debate.”In the second paragraph, what economic theory is the author describing? _________________________List 3 things that are part of this tax bill that have very little to do with federal tax structure:What is the tax increase or decrease for the following groups? $40,000-$50,000 earners ________________ people making over a million a year ___________________When Professor Kleinbard says the tax plan “is at every turn carefully engineered to deliver a kiss to the donor class”, what does he mean?Economist Stiglitz proposes two sides of the argument on why Republicans are pushing this plan. Which side to you agree with and why?The massive corporate tax cuts are being given with the theory that businesses will return these savings to the lower classes. However according to history, list at least two things that corporations have tended to do with tax cuts:As for health care and education, in what ways might these policies be affected? ................
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