On December 2, the Senate passed a tax bill that is both callous and rash. But beyond that assessment it’s also stupid, short-sighted and will have disastrous consequences for 90% of the population.
The bill is stupid because it cuts taxes for US corporations — which are enjoying record profits already without a corresponding rise in demand for their products, nor a raise in wages for their employees, nor a meaningful tax reduction for the middle class, (contrary to what the GOP and Trump are claiming as their main talking points). Yes, some people might see a modest reduction in their 2018 taxes, but beyond 2018 it will wreak havoc on the already stretched finances of the very people that put these clowns in charge.
It would have been so easy to write this bill so that it really did benefit lower and middle-income Americans while simultaneously stabilizing Social Security and Medicare. These two simple actions could have achieved so much:
- Lower the withholding tax for individuals making less than $150k a year.
- Remove the cap on wages and earnings subject to Social Security on employees (for 2018 any wages over $127,200 is exempt from FICA tax).
Instead, by year three, (conveniently after the Presidential election in 2020) the GOP bill is raising taxes on the US middle class, who have borne the brunt of the diminution of the average American’s purchasing power. The totally Republican written and passed bill is particularly stupid because there is a broad consensus of bipartisan agencies and economists who agree the U.S. cannot increase growth by anywhere near enough to offset the revenue losses driven by the tax cuts, which will blow a hole in the debt and deficit of at least $1.5 trillion. The idea that tax cuts pay for themselves has been tested time and again (just recently Kansas, and Louisiana went bankrupt under the exact same conditions that the GOP bill is mirroring for the entire country). Germany and Spain tried it after the Bush crash of 2007. In every single case throughout history, we have found that growth-related revenue always falls far short of replacing lost tax revenues. Trickle down economics never has, nor never will work because the underlying principles are complete and total fiction.
Trump’s first year budget deficit, (again, totally controlled by the majority Republican Congress and White House) is on track to exceed $1 trillion and the first year deficit under the Obama administration, (which was saddled with the fallout from the Bush Housing Crash, a crashing stock market, and millions of Americans losing their 401(k)s and pensions) while Trump inherited an Obama-era budget surplus and a recovering economy.
Middle class demand for all goods and services has been falling except for two obvious categories; mobile phones and automobiles. It’s the reason one third of all vehicles on the road today less than three years old are financed with sub-prime loans that will mostly go unnoticed until they try to trade them in and discover they owe more than their vehicles are worth. The total indebtedness on these sub-prime vehicle loans is $1.6 trillion. Another third are leased, and those lessees will discover the same conditions when their leases are up. The total value of those leases is yet another trillion dollars.
The bill is mean because in order to force fit the tax cut into the convoluted reconciliation process the Senate is using to bypass the need to attract 60 votes, the bill incorporates and depends upon a wide variety of service cuts. It’s not surprising that Jack Bogle, the founder of investment behemoth Vanguard, has called the GOP tax plans, which include a House-passed version, a “moral abomination.”
Some of the bills’ most disgraceful features:
- Janitors and other university service workers who have accepted low pay in exchange for tuition breaks for their children will now be told that the tuition breaks their children receive will be considered taxable income for the employee, generating taxes the employee cannot possibly pay. Any scholarships or other benefits that students receive will be taxable while simultaneously removing the deductibility of interest on student loans from students and their mostly middle income parents who will be indebted on these loans for decades to come.
- In the House version, teachers who buy school supplies out of their own pocket will lose the deduction for those expenses.
- Exorbitant Medical expenses will no longer be as deductible which will hit senior citizens particularly hard.
- Inheritance taxes on multimillion-dollar estates will be lowered and eventually eliminated.
- Casualty losses from natural disasters that were previously deductible because of hurricanes, tornadoes, fires, or any other national disaster that exceed personal insurance and 2% of the individual’s gross earnings are currently deductible but this bill wipes those deductions out.
- Worst of all, we are now hearing that the higher deficits will require cuts to our most important and popular social programs: Medicaid, Children’s Health Insurance (known as CHIP), Medicare and Social Security.
In addition, it is hard to understand Republican support for the current bill with the party’s longstanding and loudly voiced concerns about budget deficits and debt. After years of ranting about those issues, every Republican senator but one voted to approve this bill, which will saddle the country with a minimum of $1 trillion of additional debt.
American who huddle in the Republican tribal tents seem to have forgotten that we made our country great by building the world’s best infrastructure, by creating and sustaining the world’s finest public education system, by creating world-class medical institutions, and by engaging in a very robust research and development program. While we were doing that, we paid much higher taxes than we do today, and most Americans regarded government as a force for developing the public good. Today, only 32% of Americans think that their taxes will be reduced or that it will have a significant effect on their wages.
Our economic problems and stagnant wages are not a consequence of excessive taxes; Americans pay lower taxes, as a percentage of GDP, than the citizens of all but four other members of the Organization for Economic Co-operation and Development, and far less than the OECD average. Instead of cutting taxes on the wealthiest American, we need to focus on helping that 99% who have not done well enough. That means creating more opportunity by investing in infrastructure, expanding research and development, creating better public schools, supporting higher education — and paying the taxes necessary to support those efforts.
The Republican tax bill and its aftermath prove two things about our politics today. First, no matter how much they might insist otherwise, Republicans consistently prioritize the benefits to their doors over their own constituents, much less the country’s middle- and low-income Americans. And, second, no matter how much he might insist otherwise, Donald Trump is in perfect lockstep with the core of the Republican economic agenda and not the promises he made to the American people.
Republican senators passed an approximately 500-page “simplification and reform package” of legislation that was influenced by over 6,000 corporate lobbyists and donors– more than half of all the lobbyists in Washington, according to Public Citizen, a nonprofit organization representing consumer interests. In doing so, they raised taxes on millions of middle-class and poor Americans in order to give giant tax handouts to big business who were already making record profits and the wealthy.
Worse, Paul Ryan has expressed openly that he will use the giant deficits created by their corporate giveaways to justify cuts to Social Security and Medicare. And buried within this so-called tax reform is yet another clandestine attempt to kill the ACA which will cause 13 million Americans to lose their healthcare by killing the individual mandate to have health insurance.
And no matter what he insisted during the campaign, or his lies to the contrary since, Trump has proven himself consistently loyal to one group and one group only — his fellow big business billionaires. That’s who really won this election, and they are the winners of this tax bill. The rest of us, to borrow a phrase from Trump, are simply losers to be used as pawns in the GOP’s goal of molding a malleable and gullible tax base.
In stark contrast, the nonpartisan Congressional Budget Office estimates households making $75,000 or less a year, while likely to see modest cuts in the short term, will see a tax increase over the next decade under the Senate bill.
In fact, nonpartisan estimates reported by the National Women’s Law Center found that over 75% of the GOP tax plan’s benefits would go to the wealthiest 20% of households, while the bottom 20% would only receive around 2% of the benefits.
Simply put, women and middle-class families would be further buried by this tax plan. It’s appalling in both the House and Senate versions. It’s a back-door evisceration of the health care coverage voters in every state in our nation have said they need.
Our country is now the third worst nation in terms of income inequality — after Chile and Mexico — among the Organization for Economic Cooperation and Development countries.
Because of this rising wealth inequality, MIT economist Peter Temin recently pointed out that we’re regressing to developing nation status. This doesn’t bode well for our future economic success as a country.
We are at a defining moment in our history: The tax cuts just passed by the House and the last-minute changes to health care proposed by the Senate leadership could put our country into a tailspin. As I have recounted many times, we are mirroring the conditions that brought about the first Great Depression and as the American public fixates on convoluted ways to afford the newest smartphones, automobiles, and accouterment that they clearly cannot afford under conventional means, we continue on a course to inflict upon our children the horrific conditions of the Great Depression that are mirroring the conditions and laws that occurred under the last Republican administration with an all-Republican Congress almost exactly 100 years ago.