There's so much blatantly awful stuff in the Republicans' tax cut plans—both the version the House passed and the one the Senate Finance Committee passed last week—that it's hard to miss some of the smaller awful stuff. Like how they slip in an anti-abortion provision to lay the groundwork for a legal argument that a fertilized egg should have equal protection under the law. That's some devious shit. Here's some more, hitting people at the other end of life: they're setting the stage for future Social Security cuts.
You could argue that in a general way, they're doing that by creating massive future deficits through these tax cuts. In 10 years they can point and say, "Oh my god! These deficits! We must cut Social Security!" Which of course they'll do. But just in case that seems too obvious a ploy, they've got a sneakier one. Remember our old friend, the "chained CPI"? Well, it's back.
Right now, the basis for indexing both tax brackets and Social Security payments is the Consumer Price Index, which measures changes in the price level of basic goods and services. It's used to adjust for the real value of wages and salaries against inflation. The chained CPI (CCPI), however, assumes that people will substitute the basic goods and services they purchase. If steak is too expensive, they'll get chicken thighs. Here's how that plays out in both tax and Social Security indexing.
[T]he CCPI shows a somewhat lower rate of inflation than the CPI. Typically the gap is 0.2–0.3 percentage points. This matters in the tax bill because the cutoff for the tax brackets is adjusted each year by the CPI. If the CCPI is used rather than CPI, then the cutoffs would rise less rapidly.
For example, if the cutoff for the 25 percent bracket is $40,000 for a single individual and the CPI showed 2.0 percent inflation, then it would rise to $40,800 for the next year. This means a single person would face a tax rate of 25 percent on income above $40,800. If the CCPI showed an inflation rate of 1.7 percent, then the cutoff would rise to $40,680. This means a single person would face a tax rate of 25 percent on income above $40,680.
In a single year, this difference will not mean much, but after 10 years, the difference in the indexes would be between 2.0–3.0 percent and it would grow more through time. This will add a fair bit to many people's tax bills.
So here's the threat to the Social Security part of it: it's already been floated as a way of "slowing the growth" of Social Security, back when President Obama was flirting with his "Grand Bargain" with Republicans. Fortunately, Republicans were too allergic to Obama to do anything that he might actually agree with, so we were spared it happening. But Obama isn't president anymore, and if the CCSPI has become the means of indexing taxes, it will be a lot easier for Republicans to justify using it to index Social Security benefits.
Jam your senators' phone lines at (202) 224-3121. Tell them to vote "no" on the Republican tax bill.
Which would mean benefit cuts for seniors, and "a cut in benefits for some who have been retired for ten years of between 2.0–3.0 percent, after twenty years 4.0–6.0 percent, and after thirty years 6.0–9.0 percent." What's more, CCPI doesn't count for the things that seniors have to spend the bulk of their money on—usually medical costs and housing, which both rise in price more than the overall CPI. Seniors are less likely to be able to substitute other goods and services for what they normally buy—like prescription drugs.
The tax bills are already directly hitting seniors—they would force annual cuts of at least $25 billion from Medicare. So you've got that direct hit, and the stealth one in the form of CCPI. All so that private jet owners get some tax breaks, and corporate tax cuts are made permanent.
