Hamill: Trump tax cuts may fall on sword of Republican budget concerns

The Republican party holds a slim majority in the House and a caucus that doesn’t always caucus together. This will make for interesting times.

As we consider various legislative proposals, including the continuation of the 2017 tax cuts, it may be the Republican party that gums up the works.

With little margin for error, the Republicans will need to placate the members of their party that are concerned about any legislation’s effects on the budget deficit.

Let’s look at why bipartisanship may be needed. After the November elections, Congress passed the Social Security Fairness Act.

Well, of course they did, you say. Why would there not be bipartisan support for fairness in the social security system?

The reason is that provision increased the budget deficit by roughly $200 billion over the first 10 years. That’s a small amount compared to other current initiatives.

Also, many members thought the fairness act returned us to the unfair, or perhaps just less fair, result of the past.

But let’s focus on that relatively small cost, because that is what caused the House to lose far more votes than can be spared in the coming tax fights.

The “fairness” act repealed two provisions. The Windfall Elimination Provision, or WEP, and the Government Pension Offset, or GPO.

The WEP reduces benefits for workers who have years of earnings not covered by social security. For example, someone in a state retirement program.

The WEP adjusts the worker’s primary insurance amount, or PIA, used to determine benefits.

Social security benefits are calculated based on your average indexed monthly earnings, or AIME. The calculation is “progressive.”

Progressive means that benefits are skewed toward lower earnings. That is, there is a higher earnings replacement rate for lower earners.

Your AIME is multiplied by a factor that decreases for higher earnings AIME is split into three categories.

The lowest category of AIME is multiplied by 90%, the next category by 32% and the highest category by 15%.

If you have less than 30 years of covered work, and earnings that were exempt from social security because of another pension, your non-covered earnings are zero.

Entering zero earnings for AIME makes you appear to be a lower earner than you may be. Your other government pension provides a return for the assumed zero earnings years.

That worker then has more earnings multiplied by the 90% calculation. That person then receives a higher percentage of computed AIME as a PIA.

The WEP adjusts the social security benefit for the government pension by using a lower percentage of AIME for the first category of earnings.

This is rough justice. The reduction in PIA may be more or less than what might be considered “fair.”

The new legislation eliminates the WEP calculation for post-2023 years. It will affect about two million people.

The GPO reduces benefits only for spouses of workers and surviving spouses. Benefits are reduced by two-thirds of non-social security government benefits.

The new legislation also eliminates the GPO, again, for post-2023 years. This will affect about 800,000 people.

In the interest of saving space, I have omitted a few specific details about WEP and GPO that would interest only people who already knew about those things.

The point of the example is that the Social Security Fairness Act, whether fair or not, passed as part of the large bill to avoid a government shutdown.

Some Republican members of both the House and the Senate opposed the Act because of its cost.

The bill passed the House 327-75. Of the 75 “no” votes, 71 were Republicans. It passed the Senate 76-20, with all 20 “no” votes coming from Republicans.

There is no margin in the new Congress to lose those numbers of Republicans. Unless the Democrats “save” the legislation.

There are many proposals pending that “hard-liners” want to see passed along party lines. The extension of the 2017 tax legislation is one of them.

Extending that tax act will cost 20-25 times as much as the social security legislation.

The 2017 tax cuts may well pass a full Congress if negotiations involve give-and-take to placate Democrats.

If the social security legislation portends anything, it is that continuing the 2017 tax cuts by an en masse vote of Republicans is unlikely.