LA Progressive

Shameful GOP Tax Plan Taxes Reality

Okay, we’re off to the races on what the White House and GOP Congressional leadership agree is their “do or die” effort to look vaguely credible, having struck out so far on repealing Obamacare and pretty much everything else Trump campaigned on (infrastructure, trade, border wall, etc.).

From a religious point of view, the fate of the tax plan rests on two related reality tests.

First, and most urgently, will Democrats and the liberal establishment throw everything they’ve got against a plan as purulent as this one is, making maximum use of social media and offering a passionate justice-centered critique rather than the usual nerdy inside-the-Beltway talking points?

Will Democrats and the liberal establishment throw everything they’ve got against a plan as purulent as this one is, making maximum use of social media and offering a passionate justice-centered critique rather than the usual nerdy inside-the-Beltway talking points?

Second, will everyday people—including the many millions who claim a religious sensibility—be capable of responding to such a justice-centered critique?

To review briefly what we know about the House tax plan that was just unveiled (following weeks of anguished secret writhings among various GOP elements):

  • It’s being peddled as a “middle-class” cut, but is in fact largely an enormous bonanza for the wealthiest: the “middle-class” framing is simply a foil, but a powerful one in the media wars.
  • According to the Tax Policy Center, three-fourths of the plan’s benefits will flow to the top 20% of earners—people making over $149,000. Over the course of ten years, 80% of the benefits flow to the top 1% of taxpayers (Fun Fact #1: over the years that have passed since the Great Recession ended, this same top 1% has sucked up fully 80% of all growth in personal income nationwide).
  • The elimination of the Alternative Minimum Tax and the Estate Tax, just by themselves, will deliver a $678 billion gift to the wealthiest over ten years.
  • $2 trillion flows to corporations over ten years from a permanent reduction in the top corporate rate to just 20%, and from a couple of other corporate breaks.

There will be lots of fraudulent stuff in the rhetoric of plan boosters from Trump on down, but the biggest single lie will be the claim that the corporate tax cuts are also, in effect, middle-class cuts because the benefits will flow down to workers.

Let’s examine this claim, because it’s essential to be able to cut through this smokescreen:

  • Historically, as measured by the good old IRS, more than 75% of tax cut benefits received by corporations flow to shareholders, with only about 18% going to workers. (Nationalists take note: 35% of these shareholders in U.S. corporations are—gasp—foreigners!) But the GOP plan assumes that 70% of the new $2 trillion they hand to corporations in their package will flow down to the salaried and wage workers of these corporations. Is it not pure magical thinking for anyone to assume that the new plan will suddenly reverse the historical pattern?
  • U.S. corporations are already sitting on mountains of cash—enjoying both high profitability and historically unprecedented cash holdings—but they barely invest in new domestic jobs despite having these piles of investment-ready gelt lying around. Studies show that some 92% of U.S. publicly-traded corporations that effectively paid a rate of 20% or less between 2008 and 2015 actually cut their domestic employment levels. The record likewise clearly shows that these cash-loaded corporations have firmly declined to share their record profitability with workers in the form of wage/salary increases and improved benefits.
  • Any comparison of the job-stimulating potential of the current GOP plan and the 1986 Reagan tax cut is completely baseless. The 1986 reform was actually a reform: and it raisedboth the corporate and capital gains rates. (Fun Fact #2: corporate CEOs back then took a much higher share of their compensation in regular salary form; they didn’t bellyache that much about the higher corporate rate because the 1986 plan was giving them a nice cut in their personal tax bills. Today’s CEOs slaver after huge cuts in corporate rates because stock and stop options now account for fully 60% of their overall compensation.)

Back to the two key reality tests I mentioned at the top.

I frankly don’t know whether the Democrats and their allies are willing to call out a perfect example of class warfare waged by the overclass against the rest of us. In my view, far too many Democrats are entirely comfortable with neoliberal economics: they fully accept the thesis that a corporate-friendly regime of deregulation and low taxes is good for everyone. Far too many Dems depend on Wall Street and the 1% to fund their campaigns. Far too many are perfectly happy to campaign as culture liberals while remaining complacent, even welcoming, in respect to the rule of wealth.

As to whether everyday people would even respond to a passionate justice-centered critique of the appalling gluttony epitomized in the GOP plan: I believe they could and would respond to a full-on attack on a plan that so glaringly exacerbates already-soaring inequality. For what other reason would Bernie Sanders be the nation’s most popular politician… repeatedly? And despite what Democratic moderates (and their pundits) would have you believe, the U.S. is not a “center-right” nation; if anything, we are a “center-left” nation, especially when it comes to opposing tax cuts for the wealthy.  

Faith leaders who say they care about the most vulnerable have a real opportunity here in relation to their own messaging and advocacy. As I’ve written before in these pages, tax plans are moral documents—as much, or more so, than budgets.

Faith leaders presumably take the long view. The long view here is that if this tax plan—with its unprecedented permanent cuts—were to go through, we won’t have to wait even ten years to see acute new suffering among people with disabilities, the elderly, vulnerable children, etc. Because as sure as the sun rises in the east, GOP leaders will use the new deficits their own plan creates to demand huge cuts in the social safety net: Medicare, Medicaid, Social Security, and everything else.

Oh, and did I mention Fun Fact #3: the GOP plan, for all the pro-worker verbiage attached to it, actually raises taxes for the lowest-income workers? Hey, somebody’s got to pay.

Peter Laarman
Religion Dispatches