The Republican Congress is trying to ram through legislation that benefits the rich at the expense of some of the poorest and most vulnerable members of society. It is clearly the single most blatant giveaway to the wealthy and large corporations that has occurred in a long time. It is legislation so reprehensible that it can have a stunning effect on those already struggling to deal with so much suffering.
The way to approach detailed analysis of this type of political atrocity is to systematically break it down, so as to prevent it from be too overwhelming to look at. A first note is to observe that there was a House of Representatives version and a Senate version, both of which manage to be uniquely horrifying by having different cruel provisions.
In both versions however, the repeal of the estate tax is a big example of a handout to the richest people in the country. The estate tax only affects two tenths of one percent of the population — in other worlds, only an extremely small minority of people pay the estate tax. The idea that small family farmers pay it is a myth. The exemptions are also large — $11 million for a couple and $5 million per person — is currently allowed to be exempted, and the majority of the richest people in the U.S. are already married.
Another part of the estate tax’s relevance is that it provides an incentive for rich people to do something with their money, as there will be a fair number of people who would rather decide themselves what to do with their money than have the government decide after their deaths. The foundations and organizations rich people create are not always beneficial to the general public, but there are times when they are, and it would be a shame for that to be replaced by rich people letting even higher amounts of cash sit idle.
Use of the phrase “death tax” constitutes a propaganda term designed to provide a negative connotation to taxing extreme wealth. The alternative to saying that is to call it a Billionaire’s Tax, which in large part is what it actually is.
In any case, a lot of rich people are able to escape the estate tax through the loophole-ridden U.S. tax code anyway. That’s an argument for improving it instead of eliminating it, however. The estate tax brings in an estimated $20 billion a year, which – while not the biggest sum of money in the federal budget – still adds up to $200 billion (twice the Department of Education’s annual budget) at today’s rate over the next decade. With literally trillions of dollars worth of wealth about to be inherited over the next several decades, that number should increase substantially though.
There is also the desire to prevent an oligarchic form of society dominated by inherited wealth. The U.S. was formed in part due to revolts against the unjust control exerted by the British monarchy, which of course provides a similarly parallel example of too much inherited power. The U.S. is already either an oligarchic society or as close to being one as possible, with even elite academic research out of Princeton effectively verifying this. A small number of billionaires already exert tremendous control over various aspects of American society, and removing the estate tax will itself make that dynamic even more difficult to change.
The top 1 percent already control more wealth (at about 40 percent of the U.S. total) than the bottom 95 percent of the U.S. population. In particular, the top 0.1 percent now have the same wealth as the bottom 90 percent of the U.S. population. Income inequality also feeds into the notion of an economic oligarchy, with the top 1 percent – the richest 3 million people in a country of 330 million – receiving over 20 percent of all income. This top 1 percent – and it really is a story of the top 1 percent, as the data shows and as Occupy Wall Street accurately described – receives about half of all new income too, which shows who the economic system is primarily working to advance is.
These are levels of American economic inequality that haven’t been seen since the later part of the 1920s, and – remembering the disastrous Great Depression that followed – they are not levels that should be still here, much less be made worse.
Furthermore, the tax scheme’s deductions basically amount to a smokescreen and a talking point for puppets of the plutocratic class (Republicans in Congress advocating the tax scam) to try to convince the middle and working class that the legislation is in their interests. We could run through the deduction numbers of why the Republican Congress is again dedicating itself to serving the interests of extreme concentrated wealth at length, but the rest of the legislation alone should provide ample evidence to whom the tax scheme was actually designed for.
In a few points, raising the deductions loses relevance when the taxes on the middle class are also being raised. The added deductions therefore aren’t enough to make much – if any – of a positive difference for the middle class and poor. The Republican officials are simply trying to appeal to the middle class using baseless rhetoric because their actual economic policies cannot win enough votes.
The repeal of the individual mandate would lead to an estimated 13 million people losing their health insurance, which would also lead to increased healthcare costs via higher premiums for many people. The individual mandate is an unfortunate necessity because it has stabilizing effects on the largely mediocre, bureaucratic, and inefficient U.S. healthcare system. Millions less people without health insurance could quite likely mean that the rich are allowed to keep more money while the healthcare system is destabilized, but it isn’t entirely clear why this repeal was included in the tax scheme. It’s probably multiple nefarious reasons though.
Lowering the corporate income tax is another significant element. The U.S. may have among the highest statutory corporate tax rates at 35 percent, which is something of a memento of what it was during the generally better economic days of the mid-20th century’s golden era of regulated capitalism, but the U.S. has plenty of deductions that make the actual rate a lot lower. The effective corporate tax rate in the U.S. is actually somewhere around 17 percent on average, which puts the country towards the lower end of the OECD corporate tax spectrum. Lowering the corporate tax rate to 20 percent will probably mean loopholes in the tax code will drive that effective rate down to even lower levels, which would them force more of the general public to pay higher expenses for important government programs.
Lowering the tax rates of income from pass-through corporations is another giveaway to rich people. Using pass-through corporations would allow rich people to lower their income taxes through passing their income through those specific corporations. That would provide an incentive to use pass-through corporations that has no rational economic justification, but this is largely designed for the crony currently sitting in the White House.
Bringing back the estimated $2.6 trillion in corporate profits overseas to be taxed at a low rate is the definition of corporate welfare. Instead of being punished for immorally exploiting the loophole in the tax code, the repatriation of these huge corporate profits rewards corporate misbehavior. This experiment of lowering the corporate tax rate has already been done before, and it’s already been shown as a failure for boosting investment. Higher corporate profits have no correlation with increased investment historically. The Republican Congress is evidently willing to substantially raise taxes on struggling graduate students instead of large corporations anyway though.
Overall, it’s daunting that there’s actually a tax plan being pushed that would give even more money to the rich when they’ve done enormously well over the last four decades of upwards redistribution. The estimates are now that the top 1 percent would be gaining 75 percent of the benefits by the time the tax scheme is fully phased in by 2027. That’s class warfare in a nutshell, and robust public interest organization is the only mechanism that will reverse it.