The Republican tax bill, explained with a bowl of cartoon cereal

Ever since Republicans gained power of both Congress and the White House last year, they have been talking about doing something called “tax reform.” And last week, they released a bill that tries to accomplish just that.

Republicans often describe their tax reform goals with two common phrases that sound relatively sterile: lowering taxes and closing loopholes. Both of these sounds like good things, or at least neutral ways of moving around money.

But it’s the details behind these words that really matter.

And with the House Republican bill, hidden behind that veneer of tax reform goals is a belief that rich people in this country are taxed too much — and that the US should go further into debt to fix that.

Let’s explore with this cartoon.

And the government takes a certain amount of cereal in taxes. The more you earn, the higher proportion of the cereal the government takes. (The government is the spoon.)

For example, the government likes it when you employ other people.

So in order to incentivize that, the government will say: Before we tax your cereal, you can take out the portion you gave to your employees.

That’s called a deduction.

Over time, there are a lot of deductions that build up. For example, if you pay state or local taxes, the federal government says you can take out that amount before it gets its bite.

In addition, there are little loopholes that accrue over time.

For example, if you paid 100 cereal pieces for a house and then sold it for 200 cereal pieces, that means you had a profit of 100 cereal pieces. Normally you would need to pay capital gains taxes on that profit. But there’s a loophole that says you’re not subject to that tax.

So at the end of the day, if everyone dumped their cereal into a massive bowl, the government only considers a certain portion of the cereal as taxable — and from that portion, they use tax rates to decide how much to take from each person.

If you were to just lower tax rates, you’d run into a problem:

The government has to collect a certain amount of cereal because it needs to pay for many things, like protecting the country and helping the elderly get health care.

So in “tax reform,” lowering tax rates comes with another thing: closing loopholes and reducing deductions.

In this massive bowl of cereal containing everyone’s income, there’s a lot of cereal the government doesn’t tax. So if we change the rules and make a lot more of the cereal taxable, then the government can lower the tax rates — but still eat about the same amount of cereal.

This is called “broadening the base.”

So let’s go through these tax reform steps using the actual House Republican bill.

First, the tax cuts: The House Republican bill cuts tax rates for a lot of people and businesses. For example, the corporate tax rate is now 35 percent, but the bill cuts it to 20 percent. In all, the government would collect $5.7 trillion less than under current law over the next 10 years, according to the Joint Committee on Taxation.

But that’s only considering the tax cuts. Now let’s look at the base broadening — the part where we get rid of deductions and loopholes.

The Republican bill gets rid of many of these. For example, right now if you pay state and local taxes, that can be deducted from the amount the government taxes. The Republican bill would get rid of that.

So getting rid of these deductions and loopholes is helping to pay for the lower tax rates.

The Republican bill only gets rid of enough deductions and loopholes to bring in an additional $4.2 trillion over the next 10 years.

But here’s the problem:

In other words, this proposal doesn’t break even.

But it’s not like the federal government stops paying for things. Rather, it just goes into debt. The country has to borrow that $1.5 trillion to continue to pay for things.

The best way to think about this is that Republicans want to spend $1.5 trillion over the next 10 years to lower taxes — and they want to give it back to the people.

So who gets it?

The Tax Policy Center analyzed the Republican tax reform framework, which is an earlier draft of the actual bill, and found that the poorest 20 percent of Americans would get about $60 of that money next year.

And if you’re richer? Take a look:

In addition, an analysis by the Center on Budget and Policy Priorities found that in 10 years, the after change in after-tax income would greatly benefit wealthier people and would reduce after-tax income for some people near the bottom.

There is a rule in the Senate called the “Byrd Rule.” It says that if you want to increase the deficit after 10 years, you need at least 60 of the 100 votes in the Senate.

But Republicans only have 53 seats in the Senate, and some GOP senators have hinted they won’t vote for this bill.

So if they want to pass this bill, they have a few options.

This is assuming that many people will want to start working, work more, or work to create more jobs because the government allows them to keep more money. So in 10 years, when everyone dump their cereal into the huge collective bowl, there will be so much more cereal that it’ll make up for these cuts. (There are problems with this assumption. This cartoon explains.)

Or they could just change these rules and say they can increase the deficit beyond 10 years.

If we’re very generous and assume that Republicans truly believe cutting taxes for the wealthy will grow the economy a huge amount, then we’re back to the traditional conservative argument of trickle-down economics — the idea that the rich will grow the amount of cereal for everyone, so everyone can get more cereal.

But if we get beyond that, we get to the sobering truth that this tax bill is a moral proposition. It’s saying that rich people are paying too much in taxes, that they’ve been paying too much for a long time, and that it’s now time to give money back to them by incurring an additional $1.5 trillion in debt over the next 10 years.

Yes, this bill “simplifies” the tax code, and yes, this bill cuts taxes for most people, especially the very wealthy. But in the details, it conveys a clear belief about what fairness should look like in America.