Here’s how the government is supposed to work. We, the People, elect representatives to pass laws that will “establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty.” Then, they have the responsibility to tote up what it will cost to meet those obligations and raise enough money to pay for it by a fair and equitable system of taxation.
Unfortunately, the practice doesn’t match the intention. Public servants want to be popular with their constituents, especially those who pay for their re-election, so they worry more about the particular welfare of some than about the general welfare of the many.
They also know that people like government services, but hating paying the taxes they require. So, they run huge deficits rather than levy enough taxes. It could be more corrupt, but not easily. High on the list of corruptions is the habitual lying to cover up the reality of the situation. The Republican’s proposed “Tax Cut and Jobs Act” is accompanied by a symphony of dishonesty beginning with its name. Let us count some of the ways.
First Falsehood: This Tax Reform won’t increase the deficit. That’s because the economy will be so juiced by cutting tax rates that more tax dollars will be produced than lost.
This is the same old supply side mantra, and it has always been voodoo economics. When Reagan tried it, with a magic asterisk to stand for revenues that would suddenly appear out of nowhere, he found he had to reverse course and raise taxes to prevent huge deficits. Republicans cared about deficits then.
Kansas Governor Sam Brownback drank the same Kool-Aid, and hosted a tax-cutting jamboree for businesses and the wealthy in 2012. He promised a rocket-propelled economic boom with 10,000 new jobs. Instead, the bond rating of Kansas tanked, its schools and public services suffered, and the promised boom never materialized. Kansas fell from 12th to 41st in personal income growth.
The lesson is that there’s no such thing as a free lunch. The proposed Tax Cut and Jobs Act will add a minimum of $1.5 trillion to the national debt, probably much more. And to benefit whom?
Second Falsehood: This is a middle-class tax cut.
Really, then how come 80 percent of the cuts go to the top sliver of taxpayers? The elimination of the estate tax will certainly not benefit the middle class since it only applies to 5,400 tax returns a year, those who die with estates worth over $5.5 million.
The claim that the estate tax hurts family farms is also a fraud. Last year only 80 estates large enough to owe the estate tax were family farms. No, it is not hardworking sod-busters, but people like Donald Trump who would benefit from eliminating the estate tax. Instead of Ivanka, Don Jr., Eric, Tiffany and Barron inherited $3.6 billion, they would have to limp by on $2.6 billion.
Similarly, the elimination of the alternative minimum tax would only benefit people rich enough to be dodging their fair share of taxation through the use of copious loopholes that middle class taxpayers have never heard of and don’t earn enough to exploit.
The law also allows favors the pass through loophole that allows personal income to be taxed at a lower business rate. The tax writers claim this helps small businesses thrive, but the most important small business lobbying firm has denounced the tax plan.
Turns out the mom-and-pop businesses that tax apologists sentimentalize don’t qualify for the proposed rules, but giant law firms and hedge funds do. Dallas Cowboys owner Jerry Jones, worth $3.8 billion, takes advantage of the loophole, and so does President Trump. Once again, the Republicans are pretending to help the middle class and small business owner, but the benefits all flow to the fat cats who fund their campaigns.
In fact, many provisions of the bill penalize the middle class. Deductions for people with large medical bills would be eliminated, so would deductions on student loan interest, for losses due to floods or storms. Tax breaks that incentivize businesses to hire veterans or invest in poor neighborhoods would also be axed.
Until a great hue and cry was raised, the tax wizards were even proposing to curtail tax breaks for 55 million employees who save for retirement using 401(k) plans. And they are now proposing to add cuts in Obamacare funding to the bill. This would allow them to fund $400 billion in tax cuts for the rich by denying health insurance to 15 million working class Americans.
Third Gigantic Falsehood: Well, okay the tax cutters may be screwing the working class and further feathering the already palatial nests of the filthy rich donor class, but it’s all worth it because big tax cuts for big corporations and big investors will create jobs, jobs, jobs.
But believing in faith-based financial fictions doesn’t make them true. Yes, Americans corporation may have $2.5 trillion overseas, and a reduced tax rate might encourage some of them to bring the money home. But maybe it is already home. These are multinational business who build plants, buy equipment and sell their products abroad. The money may already be where they see more opportunities than in Keokuk.
Even if a percent of the overseas dough is repatriated, there’s no guarantee it will be invested in creating new jobs. Business analysts believe a lot of it would just be used for stock buybacks or shareholder dividends, or possibly invested in robots rather than flesh and blood hires.
Similarly, there’s nothing to compel wealthy individuals who get those stock windfalls or benefit from tax breaks aimed at people in their bracket to buy American. They can use their treasure to snap up foreign properties or to invest in the stock of Chinese, Indian, Brazilian or even Russian companies. Just ask Commerce Secretary Wilbur Ross who has some of his billions in a business run by Putin’s son-in-law.
If Congress wants to create jobs, instead of tax breaks that may do nothing of the sort, how about spending money on workforce education or infrastructure. Or if the goal is really to help the middle-class taxpayer, instead of cutting $1.3 billion in taxes on corporations and wealthy who don’t need it, why not target all the windfall at those who will spend it.
This bill promises the average working-class voter a paltry $100 a month windfall, barely enough to pay a utility bill or for a week’s worth of groceries. But spend it they will. And if you gave them a far larger tax break, they would spend that too, or maybe save for retirement or college. That would surely juice the economy.
Trickle down hasn’t worked. Maybe it’s time to try tickle up. And it is certainly time to stop lying about the real motives behind tax cut fever. As the entire discussion make clear, the object of the game is to pick winners and losers. It is about tilting this way and that depending on who deserves a break.
As noted at the outset, the tax system should be organized to raise money to pay for government programs. Not to play favorites, pay bribes or reward donors. It should be as blind as justice and as impartial as an umpire. Nothing in this “reform” makes that more likely. It merely gives more spoils to the haves and fewer to the have-nots.