Shawn Vestal: Cheers for tax cuts overlooked downstream effects

In the Trump era, there is no reliable ceiling on overstatement in public life: Anybody might say anything, and those who traffic in political balderdash have removed all shackles of truthfulness.

Anything goes. The market on hyperbole booms, exuberantly.

Understatement, on the other hand, has become a gem of exceedingly high price. And, while the year is new, we’ve already gathered one excellent candidate for the best political understatement of 2018.

The chairman of Idaho’s tax-collection agency, Ken Roberts, addressed lawmakers in Boise last week, reporting his analysis of the effect of the new federal tax-cut package. His conclusion: Idahoans could collectively pay almost $100 million more in state taxes in the year to come, based on effects from the new federal law.

“I think,” Roberts said, “the perception was that this was going to be a tax decrease.”

Give that man the Golden Globe for drollery.

Yes, the perception was indeed this was going to be a tax decrease. Even those who accept the many bleak and concrete evaluations of the new law’s probable effects – its deficit-busting, its vanishing cuts for the middle class and poor, its boundless generosity to the wealthy, its end-run assault on the safety net – were under the impression that there would at the very least be tax decreases for just about everyone at the outset.

Among tax-cut fundamentalists, of course, there was something stronger than that. Swimming upstream against the independent analyses and the economic evaluations, the tax-cut sales force simply insists that the cuts will produce a flowering garden of benefits for everyone. Rising wages. Bonuses everywhere you look. Investments, innovation, morning in America. So much new tax revenue that the deficits predicted by everyone will simply never materialize.

They’re magic, these tax cuts. Everyone pays less. Everything gets better. That was indeed the, uh, perception.

Raul Labrador, for example, seemed sure about all of this, in announcing his vote for the tax reform.

“Any time we can allow hard-working Idahoans to keep more of their money, that’s a good thing,” he said.

Labrador’s House colleague, Mike Simpson, was equally bullish: “Simply put, this legislation will create economic growth in the United States by unleashing American small businesses and unburdening middle class families so they can make better financial decisions with their own money.”

Sen. Jim Risch: “The aim of this entire exercise is to reduce the burden on taxpayers.”

Sen. Mike Crapo: The bill “will allow Idaho’s hard working women and men the ability to keep more of their hard earned money instead of sending it to Washington.”

Weirdly, perhaps, none of them noticed that the downstream effect of the federal law that does all that unleashing and unburdening actually does a little bit of leashing and burdening here and there.

Roberts, the head of the Idaho Tax Commission, briefed Idaho legislators last Friday on the unexpected impact, which arises from the fact that state income tax collections “conform” to federal collections. States may choose to conform with some, all, or none of the federal law and the manner in which income and exemptions are calculated, but Idaho has been conforming – largely as a way of streamlining and simplifying tax filing for individuals and businesses.

The new federal law eliminates exemptions and deductions that Idaho allows, such as the personal and dependent exemptions, and the increase in the standard deduction doesn’t make up for that, according to Roberts’ analysis. So, if Idaho continues to conform with the federal law, it would bring in $97.4 million more in fiscal 2019.

State lawmakers will surely look at that during the session to come, and one suspects they will try hard to find ways to offset that effect. But it creates a whole basket of unintended challenges.

Overall, trying to suss out the impact has been, and will be, an incomplete enterprise as the effects – whether predicted or unforeseen – play out and as the true believers insist everyone else is wrong. Some companies have rushed to pass along bonuses or raises to workers, announcing these measures with a pronounced public-relations fervor.

If benefits flow to workers, that will be great news. If, however, these relatively inexpensive marketing stunts fade away, and taxes rise – as predicted by congressional budget analysts – and Congress begins to hunt for ways to pay for the corporate and top-tier tax cuts that don’t vanish … well, those workers may find the deal doesn’t pencil out all that well for them.

In Idaho, as across the nation, time will tell. There may be some results that pierce the veil of perception and make us rethink everything we thought we knew.

Who knows? Maybe Idaho will just put that extra $100 million into the schools.