Let me get this right. A so-called tax “reform” bill that could screw up our economy, hurt millions of middle class families and is opposed by a strong majority of the American people is being rushed through the Republican-controlled Congress without serious deliberation simply because fat cat Republican donors have warned legislators that their campaign donations will dry up unless they pass a bill before Christmas providing windfall tax benefits to them, their top-of-the-heap brethren, and our grifter President. President Trump, eager to sign anything, is treating as suckers all who voted for him believing his populist economic message. They may not wake up until it’s too late.
Speaker Paul Ryan boasted how the bill was designed to provide bigger paychecks for all hardworking taxpayers, but never held hearings to support his claim. House members got just 20 minutes to review the over 600-page bill before voting.
Years ago, political scientist Murray Edelman warned that, when political rhetoric extols the public interest to be served, the fix was usually already in for private interests. And so it is here. It’s not tax “reform,” which, if revenue neutral, could be laudable. It’s a special-interest giveaway to the uber-wealthy that will harm the economy.
Remember how Trump railed against the so-called carried interest rule that has hedge fund managers paying just 20 percent? Repeal of that somehow didn’t make it into either House or Senate bill. But don’t fret for hedge fund managers. They would be like other privately owned businesses, “pass –through” corporations where profits pass through to the owners . Today, profits that exceed $418,400 are taxed at the top personal rate of 39.6%. Under the GOP plan, that would drop to a 25% corporate rate, saving Trump and his cronies multi millions.
The so-called middle class tax cuts are either small and temporary or immediately non-existent for some who itemize. About 13 million middle and upper middle class families will be hurt. Massachusetts (and other blue state, high tax) taxpayers will be hard hit by the elimination of the deductability of state and local taxes. By 2027, the regressive model bites harder, with all earning less than $75,000 facing increases.
The principal beneficiaries, who will get about 80% of the cuts, are corporations, businesses and wealthy families Their windfall provisions, including the elimination of the Alternative Minimum Tax (AMT) and the Estate Tax, will be permanent.
The AMT was designed to prevent the wealthy from exploiting tax code loopholes. We don’t know what Trump’s current tax situation is, but the partial disclosure of his 2005 returns indicate he paid an effective rate of 25% (about $38 million on more than a $150 million income). Without the AMT, his tax rate would have been only 3.5%, a windfall of over $32 million. So much for the President’s lies about how much the pending tax changes would hurt him. And that’s before considering now his family benefits from elimination of the estate tax. And, by the way, the Tax Foundation warns that the Senate version changing real estate depreciation rules will benefit only a few real estate billionaires and cost the Treasury billions.
The simple fact is a tax cut now is not what the country needs. The 1981 Reagan tax cut was passed because of a weak investment climate. The 1986 tax reform was bipartisan and revenue neutral, designed to simplify the code, not provide a cash windfall to the top one percent. Neither scenario applies today.
CEOs even told Trump’s National Economic Council head Gary Cohn that, if their corporate tax rates were lowered, they wouldn’t invest more. Corporate cash reserves are high; borrowing costs are still low and, if CEOs want to invest, they can do so with little trouble. Plus, there is scant evidence that lower rates and more cash would mean larger salaries for their workers. If this passes, the trade deficit will balloon, the opposite of what the President claims he wants. It will likely spur inflation and, eventually, budget cuts and a tax hike to cover the shortfall.
Fiscal conservative, Walter Jones from North Carolina. dissented because the trillions the bill would add to the national debt would mean borrowing from adversaries like China, adding a $12,000 burden on every American household. As Jones said, “If this had been a Democratic bill, we wouldn’t even be voting on it.”
Attention now shifts to the Senate, where Republicans tucked in repeal of the ACA’s individual mandate. which will raise health care premiums, deter some 13 million from getting coverage, and add to pressures later to cut Medicare and Medicaid. It’s included as a gimmick to get the bill passsed without any bipartisan support.
If Democrats hold firm, three Republican votes will be needed to block this monstrosity. Might Senators Bob Corker and Jeff Flake, no longer needing to face primary challengers, join Jones in standing for conservative principles and oppose swelling the federal debt?Wisconsin Senator Ron Johnson, who announced his opposition because the bill isn’t harsh enough, will probably fold once he cuts his deal. Maine Senator Susan Collins is one of the few Republicans who admits publicly what’s really at stake, but Alaska’s Lisa Murkowski probably won’t join her again. John McCain, celebrated for standing up for the “regular order” on the ACA repeal, has another opportunity to stand tall for fundamental Senate norms and sway a few colleagues here. But will he?
The cynic in me wonders if cultivating media attention on the important sexual abuse issue is part of a GOP smokescreen designed to distract public scrutiny of the tax bills’ winners and losers. The lack of coverage of the tax cut issue will have consequences.
I have a dream that some senators from Trump states whose voters realize the impact on their families will mobilize. Too many hard-pressed working class Trump voters are still drinking the Koolaid, and whatever he claims to be in their name is fine with them. His populist promises be damned, the tax bill is ill-timed, wrong-headed and damaging to the economy. If people don’t act now, it will pass.
I welcome your comments in the section below. To be alerted when a new blog is posted, click on “Follow’ in the lower right portion of your screen.
One thought on “Cutting taxes for rich isn’t tax reform”
Leona Helmsley was right.