U.S. Could Eliminate Its Child Poverty for the Cost of the Republican Tax Scandal

Congressional Republicans preferred the giveaways to the rich and major corporations over eliminating what is arguably the biggest moral failure of world history’s wealthiest country — child poverty. The U.S. child poverty rate is over 20 percent, and it’s easy to see why when the last four decades have been full of unjust income redistribution from the bottom to the top.

Congressional Republicans are rushing to finalize their tax legislation before the holidays. They haven’t held a single hearing, in part because their plan is one of the least popular pieces of legislation ever. It’s easy to see why: The Senate version of the bill would raise taxes on most families making $75,000 or less per year by 2027, while tying a big bow on permanent tax cuts for millionaires and large corporations. And after years of panicking over the size of the deficit, Republican leaders are now planning to balloon it by a whopping $1.5 trillion over the coming decade.

That tells you a lot about Congress’ priorities—especially since, for less than the cost of the Republican tax plan, Congress could eliminate child poverty in the United States. Twice.

According to the U.S. Census Bureau, the 5.7 million poor families with children would need an average of $11,400 more to live above the poverty line in 2016. In total, the income needed to boost these families—along with the additional 105,000 children who were not living with their families—above the federal poverty level is about $69.4 billion per year in today’s dollars. Over ten years, that adds up to about 46 percent of what Congress plans to spend on its tax plan. There would be so much money left over after we boosted these kids out of poverty that the United States could also pay tuition and fees for all of them to get an in-state education at a four-year public university, and it still wouldn’t costs as much as the tax plan.

If Congress wanted to really let loose, and spend just 12 percent more than the tax bill does—for a total of $1.74 trillion—we could completely eliminate all poverty in America.

But instead of reducing poverty in the United States, Congressional Republicans are chipping away at the existing programs that support low-income people. Congress was so fixated on repealing the Affordable Care Act this summer that it ran out of time to reauthorize the Children’s Health Insurance Program (CHIP), which insures 9 million kids. It has been 73 days since CHIP’s funding expired, and more than half of states could run out of money in the first months of 2018. Some are already paring back services in preparation.

And now, House Speaker Paul Ryan (R-WI) and his fellow Congressional Republicans have announced that their next priority is cutting critical programs such as Medicaid, which provides health care to 2 in 5 U.S. children, and Social Security, which is the nation’s largest children’s anti-poverty program. To pave the way for these cuts, Ryan and friends are already rolling out poisonous rhetoric that paints low-income families as lazy and idle—even though Census data show that most families with children living in poverty do work, and are just being paid so little they can’t make ends meet.

These policies are obviously cruel. But, for a group of lawmakers who fancy themselves business-minded, they’re also stunningly financially irresponsible. Child poverty costs the United States a lot of money: an estimated $672 billion per year in lost productivity, worse health outcomes, and increased criminal activity.

Instead, congressional Republicans are choosing to saddle the nation’s kids with debt—the very thing they’ve repeatedly accused past administrations of doing—to finance a massive giveaway to the wealthy.

Corporations Trying to Sell the False GOP Narrative on Tax Cuts

Hey, this latest U.S. tax scandal will be the third time in the last 40 years that America runs the detrimental experiment on big tax cuts for the wealthy and large corporations. Every rational person should be able to see that it won’t work out well for most people.

The Republican lawmakers have sold the corporate portion of their tax cuts with the claim that it is actually about helping workers. Their argument is that the corporate tax cut will lead to so much growth that the increase in wages will actually be considerably larger than the tax cut itself. The GOP’s story is that lower corporate taxes inevitably mean more investment, which means higher wages for more workers, as well as increased imports and greater productivity.

The vast majority of economists have questioned this basic logic, because in the past, investment has not been highly responsive to after-tax rates of profit. But that didn’t stop the Republican-controlled Congress from passing the tax bill. And now, in an effort to build public support for the corporate tax cut, several major corporations have been announcing bonuses and pay raises for workers.

AT&T announced that it would give a one-time bonus of $1,000 to 200,000 workers. Its rival Comcast also promised a $1,000 bonus for 100,000 workers. Fifth Third Bancorp promised a $1,000 bonus for 13,500 employees, while raising its minimum wage to $15 an hour. Wells Fargo said it would raise its minimum wage to $15 an hour, too. Boeing announced a $300 million fund to be spent on training workers, upgrading facilities and matching workers’ charitable contributions.

While the employees getting these increases will undoubtedly be pleased, there are a few caveats that must be kept in mind.

First, many of these announcements refer to one-time bonuses, not permanent pay hikes. This is not what the GOP promised. The corporate tax cuts were made permanent on the grounds that companies needed the expectation of higher future after-tax profits in order to justify greater investment today. If the economy is following the course predicted by the Republicans, all these pay increases should be permanent, too.

The second caveat is that some of the increases may have little to do with the tax cut. They can be attributed instead to the tightening labor market, along with higher minimum wage laws. This is especially true of Wells Fargo, which is based in California. The state has already passed into law a $15 minimum wage, which is scheduled to be fully phased in by 2022.

Wells Fargo will be getting there a bit more quickly if it adopts its $15 minimum in 2018. It will also be applying that hike in parts of the country where the federal minimum wage of $7.25 an hour still sets the standard, but even in these other areas, a tightening labor market is putting upward pressure on wages. Last summer, Target announced that it would get to a minimum wage of $15 an hour by 2020. That announcement had no obvious connection to any expectation of a corporate tax cut.

Third, but perhaps most significantly, these pay hikes are not especially large relative to the size of the corporate tax cut. Take the example of AT&T: In 2016, the company reported operating income, net of interest, of $19.4 billion. It paid $6.5 billion in taxes, which means an effective tax rate of 33.5 percent.

If it had instead paid the 21 percent tax rate in the new bill, AT&T’s savings would be $2.4 billion. The promised bonus for 200,000 employees comes to $200 million, or less than one-tenth the size of the tax cut. This is very much in line with the expectations of tax bill critics, who predicted that the overwhelming majority of the money that corporations now get to keep will end up as higher profits paid out to shareholders, not as permanently higher wages for workers.

The end of the article says that “So if there is going to be the huge upsurge in investment predicted by tax cut supporters, it should be showing up in the data on orders for capital goods almost immediately. . . Until we get those data, we have little basis to judge whether the tax cut will deliver the economic growth and pay increases the Republicans said would happen.” Prediction in human affairs is often a difficult task, but it’s apparent that the extra profits grabbed via the tax cuts will primarily go towards enriching executives and shareholders instead of increasing worker wages and creating valuable investments. This scam has already been seen enough times to realize that.

The Congressional GOP Tax Scam

The tax scam is absolutely horrendous. U.S. citizens, call or contact Congress if you are able. The Capitol Switchboard number is 202-224-3121.

Just as “bombshell” revelations where being made public late Friday morning about President Donald Trump’s former national security advisor Michael Flynn, Senate Majority Mitch McConnell told reporters just before noon—following a “complete shit show” of legislative maneuvering on Thursday night—that Republicans finally “have the votes” to pass their widely decried tax overhaul bill.

As numerous critics have warned, the GOP plan would exacerbate already historically high levels of economic inequality by giving enormous tax cuts to corporations and the richest individuals while increasing the tax burden on millions of low-income and middle class families in order to pave the way for massive cuts in future social spending, including a premeditating assualt on education, Medicare, Medicaid, and Social Security.