Don't Be Fooled by Donald Trump's 'Tax Reform' Talk - It's Another Massive Tax Cut for the Rich
While Republicans keep putting the defibrillation paddles on their attempts to repeal the Affordable Care Act, the legislation seems to be as dead as a cancer patient who lost his health care in the pre-ACA era. And as many derided Republican attempts to pass a replacement plan, titled the American Health Care Act, as a “health care” bill, similar skepticism should be reserved for GOP’s next agenda item: tax reform.
“This isn’t a healthcare bill. It’s really a tax cut,” Charles Pierce of Esquire wrote of what quickly became known as Trumpcare. “This bill is not concerned with providing affordable health insurance to the most people. It is a designed to give a massive tax cut to the wealthiest Americans.”
The same point needs to be made when it comes to Republicans’ plans for “tax reform.” If it’s based at all on the “Better Way” plan created by House Speaker Paul Ryan, then there is no doubt it will not be true tax reform. Instead, it will just be a tax cut for the wealthiest Americans.
“It’s really remarkable how, across so many different issues, Republicans are essentially trying to find a way to give tax cuts to the wealthy,” Harry Stein, the director of fiscal policy for the Center for American Progress, told Salon. Stein argued that beyond tax reform, whatever idea that the Republicans under Trump and Ryan roll out — for child care, for infrastructure, for health care — will have a lot of high-minded rhetoric, but ultimately will end up being little more than a tax cut for the wealthiest Americans and for corporations.
“If any legislation cuts taxes for corporations or the wealthiest Americans by even $1, lawmakers should vote no,” Stein suggests.
This reasoning may seem a bit harsh, but, as Stein argued, a lot of our country’s economic problems stem from our already too-low tax rates on wealthy Americans and corporations. According to Stein, there’s substantial reason to believe bigger tax cuts will only make things worse.
Ryan believes slashing taxes for the wealthiest Americans, on the other hand, will grow the economy. And while he takes pains to avoid the phrase “trickle down”, that’s inherent to his arguments. “Here’s the point of our tax plan. Grow jobs. Get this economy growing. Raise wages,” Ryan said on “60 Minutes” in December.
“If you believe that lowering the top tax rate is the secret sauce to growing the economy, then that effect has been invisible,” Stein said of Ryan’s economic philosophy. As his paper lays out, the real correlation is between higher taxes on wealthy people and corporations and economic growth. And while correlation doesn’t equal causation, Stein suggested there’s a few reasons to believe that higher taxes on the rich leads to better economic outcomes for lower and middle class people.
To begin with, cutting taxes for the rich is expected to lead to the slashing of social programs, from education to Medicare to Social Security, that middle and lower income people depend on.
“The sequence that people like Paul Ryan want to use here is to cut taxes for the wealthy or corporations, and then point to deficits that are caused by those tax cuts, and say we have a fiscal crisis, so we have to cut Social Security or Medicare and Medicaid,” Stein explained. But even if those programs remain untouched — unlikely, given what we know about Republican hostility towards government spending — there’s reason to believe lowering taxes on the rich is inherently damaging to the pocketbooks of ordinary Americans.
“While low taxes don’t help the economy, they do help the rich get richer,” Stein explained, and that leads to greater income inequality. “What we’ve seen is when inequality goes up, consumer purchasing power goes down and the economy becomes unstable,” Stein added. Buying a house, paying for child care, paying for college, and saving for retirement are all likely to become too expensive for middle class people to afford, and instead start turning into expensive luxuries for the wealthiest Americans.
Buying a house, paying for child care, paying for college, and saving for retirement are all likely to become too expensive for middle-class people to afford, turning traditional hallmarks of American life into expensive luxuries reserved for only the wealthiest Americans.
Additionally, there’s reason to believe that low taxes on rich people can contribute to lower wages for ordinary workers. “There’s good research that skyrocketing CEO pay is a direct result of tax cuts for the wealthy,” Stein explained. When CEOs have low taxes and corporations can exploit tax loopholes to offer management huge compensation packages, a larger amount of that company’s money goes into management compensation, Stein pointed out. In turn, a lot less of the tax savings actually goes to the workers.
“A tax system that doesn’t let the wealthy avoid taxes would be a tax system where even before people pay taxes, there’s a more equitable distribution, where workers are getting a larger cut of a company’s earnings,” Stein explained.
Unfortunately, fighting off a Republican tax cut for the rich may be more of a lift than killing the health care repeal bill was. The message that Republicans are going to strip you of your health care was a straightforward political message that was easy to communicate to voters across the country. The relationship between stagnating wages and tax rates is a bit harder of a sell.
The relationship between stagnating wages and tax rates is a bit harder of a sell.
Still, there’s reason to believe that the same grassroots forces that derailed the health care repeal have a real chance at killing off a potential tax cut for the rich. For instance, most voters instinctively understand that when the rich hoard all the money for themselves, there’s not much left over for the rest of us. According to a 2015 Gallup poll, 62 percent of survey respondents believe the rich pay too little in taxes and 69 percent believe that corporations pay too little.
Progressive groups will have an easier time, of course, if Democrats stiffen their spines and tell the Republicans that they will refuse to vote yes on any bill, be it a “child care” bill or a “tax reform” bill, that is really just a tax cut for the rich in disguise. A red line must be drawn.