Tax Cuts and Growth

The data is revealing enough about the lie too common among politicians.

In decades past, there was bipartisan support for policies that laid the basis for a long period of broadly shared prosperity. Unfortunately, this consensus seems to have been replaced by the narrow-minded greed of the very rich and, insofar as they can continue to get their way, the story is not likely to end well.

Take, for instance, the Republican tax plan, which passed in December and contained a potpourri of tax breaks for special interest groups and high-income households. Its centerpiece was a large cut in the corporate income tax; the plan lowered the rate from 35 percent to 21 percent.

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First, we tried cutting corporate taxes to stimulate the economy before: Although it received little attention during this most recent debate, the corporate rate was lowered from 46 percent to 35 percent in 1986, roughly comparable to the current cut. If we consider the share of profits that firms get to keep, the 1986 cut meant that the share kept increased from 54 percent to 65 percent, a 20 percent increase. The latest tax cut increased the share of profits that companies get to keep by 22 percent, going from 65 percent to 79 percent.

The 1986 tax cut did not, however, lead to an investment boom. In fact, investment actually fell relative to the size of the economy in the next two years. So, it’s hard to believe that the slightly larger tax cut in the new bill will have a more positive impact on investment.

Besides which, as a practical matter, tax rates have been shown to be a relatively minor factor in determining where companies invest – but they do affect where companies have their profits appear. For example, Apple reports that a huge share of its profits were earned in Ireland, where the corporate tax rate is just 12.5 percent, and Google claims to earn billions in the Cayman Islands, where the tax rate is even lower.

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But what is perhaps most disturbing about the Republican tax plan is that it seems to steer the United States in the opposite direction of proven paths to growth. Looking back in the past, whether across states or across countries, low tax rates have never been the spur to growth. The spur to growth has been a well-trained and well-educated workforce, coupled with the infrastructure needed to support growth.

Republican Tax Scam Gives 15 Giant U.S. Corporations a $236 Billion Tax Cut

What a time to be alive while witnessing these giant moral travesties that benefit the richest corporations at the expense of the general public.

In “further proof that the Republican tax bill is a massive giveaway to the largest corporations in the country,” a new report (pdf) prepared for Sen. Bernie Sanders (I-Vt.) and published on Monday found that 15 of America’s most profitable corporations would receive a combined $236 billion tax cut if the GOP plan becomes law.

Released as Republicans gear up for a final vote on their tax bill as early as Tuesday, the report notes that “[o]ver the last 30 years, 15 of the largest U.S. corporations have accepted $3.9 trillion of corporate welfare in the form of subsidies, tax credits, and bailouts, and another $108 billion in government handouts in the form of federal contracts.”

“On top of this $4 trillion boondoggle,” the analysis adds, “Republicans want to give these corporations an additional $236 billion tax cut.”

Among the companies the report highlights are Apple, Pfizer, and Walmart, all of which utilize fancy “accounting tricks to dodge taxes” while also taking advantage of government programs that add to their bottomlines at the expense of American taxpayers.

moral-travesties

The report goes on to observe that far from living up to its lofty goal of discouraging outsourcing, the deeply unpopular GOP tax bill actually “encourages companies to shift their jobs and profits overseas by moving to a ‘territorial’ tax system that would exempt future offshore profits of U.S. subsidiaries from taxation.”

While these companies stand to benefit massively from the GOP’s bill, “more than half of middle class families will pay more in taxes at the end of ten years,” Sanders said in a statement.

“Further, by running up a $1.4 trillion deficit, the Republicans are paving the way for massive cuts to Social Securirty, Medicare, and Medicaid,” Sanders concluded. “This is a tax bill written for wealthy Republican campaign contributors, not for the average American. It must be defeated.”

Sanders’ report coincides with an analysis (pdf) released Monday by the nonpartisan Tax Policy Center, which found that over 82 percent of the GOP bill’s benefits would go to the top one percent of Americans and nearly 60 percent would go to the top 0.1 percent by 2027.

The Republican Congress’s Massive Tax Scam

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.

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.

U.S. Data Mostly Disproves Notion of Capital Flight Following Higher Taxes on the Rich

Some of the strongest arguments for higher taxes on the richest people in the country are how there’s been an enormous upward redistribution of income over the last four decades, how there’s a strong majority of public support for higher taxes, and how there’s an immoral economic landscape for the lower classes that contains — among other defects — a child poverty rate over 20 percent. The situation of inequality has become absurd enough that there are even groups such as Patriotic Millionaires that are supporting higher taxes on rich people.

In the classic Ayn Rand novel Atlas Shrugged, the rich go “on strike” – withdrawing their services and disappearing from society in protest against taxes and regulation. Weary of carrying an ungrateful world on their shoulders, business leaders and other top income earners finally shrug, and leave the world without them.

The book’s metaphor inspires political rhetoric to this day: if you tax the rich, they will leave. Variations on the threat are issued by well-off individuals all over the world – not least in the United States, where each state sets its own tax policies, and periodic warnings are issued that taxes on the rich will lead to millionaire migration to more obliging US states.

When Oregon voters passed a millionaire tax at the start of this decade, for example, the state’s richest resident, Nike CEO Phil Knight, warned the tax would set off a “death spiral … in which thousands of our most successful residents will leave”. As California considered similar taxes, policymakers cautioned “nothing is more mobile than a millionaire and his money”. In New Jersey, governor Chris Christie simply stated: “Ladies and Gentlemen, if you tax them, they will leave.”

But does this rhetoric stand up to statistical scrutiny? To better understand elite migration across state lines, I analysed tax return data from every million-dollar income-earner in the United States. The dataset includes 3.7 million top-earning individuals, who collectively filed more than 45 million tax returns over more than a dozen years – showing where millionaires live and where they move to.

And it turns out that place still matters for the rich – much more so than we might think.

Only about 2.4% of US-based millionaires change their state of residence in a given year. Interstate migration is actually more common among the US middle class, and almost twice as common among its poorest residents, who have an annual interstate migration rate of 4.5%.

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The Forbes list of the world’s billionaires offers an international look at elite migration, and takes us higher up the food chain to the greatest corners of wealth.

Analysis of this list shows most of the world’s billionaires – about 84% – still live in their country of birth. And among those who do live abroad, most moved to their current country of residence long before they became wealthy – either as children with their parents, or as students going abroad to study (and then staying).

Only about 5% of world billionaires moved abroad after they became successful. These individuals readily fit the stereotype of a “transnational capitalist class” – unplugged from their nation state, travelling the world for some combination of tax avoidance and cosmopolitan lifestyle.

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Millionaire tax revenues could be used to invest in things that matter to young people starting out: education, infrastructure, public services, urban amenities, quality of life. And this would help to attract and retain a pipeline of future top-earners, creating a virtuous tax circle.

Group of Over 400 Millionaires and Billionaires Tell U.S. Congress to Raise Taxes on Them Instead of Cutting Them

Cutting important public services for tax cuts has long been the twisted plan of congressional Republicans. Higher taxes on large corporations and the wealthy comes in at 70 percent support in the U.S. for a reason.

More than 400 American millionaires and billionaires are sending a letter to Congress this week urging Republican lawmakers not to cut their taxes.

The wealthy Americans — including doctors, lawyers, entrepreneurs and chief executives — say the GOP is making a mistake by reducing taxes on the richest families at a time when the nation’s debt is high and inequality is back at the worst level since the 1920s.

The letter calls on Congress not to pass any tax bill that “further exacerbates inequality” and adds to the debt. Instead of petitioning tax cuts for the wealthy, the letter tells Congress to raise taxes on rich people like them. It is being released publicly this week, as Republicans debate legislation that would add $1.5 trillion to the debt to pay for widespread tax cuts for businesses and individuals.

GOP Continues to Wage Class Warfare With Inhumane Tax Bill

The worst Republican congress in history seems to have little shame.

“Soaking broke-ass grad students to pay for a private jet subsidy. All-out class war on the 99 percent.”

That was how one commentator described a pair of provisions buried in the GOP tax plan that passed the House on Thursday and is likely headed to the Senate floor for a vote as early as next week.

One provision—crammed in the middle of the latest version of the so-called “Tax Cuts and Jobs Act”—would provide a windfall to the wealthy few who own or lease private planes by exempting them from certain taxes related to “maintenance and support,” “the hiring and training of pilots and crew,” and “administrative services such as scheduling, flight planning, weather forecasting, obtaining insurance, and establishing and complying with safety standards.”

Graduate students, however, would not fare so well if the GOP plan becomes law.

As CNBC reports, “[s]ome programs provide graduate students with a modest stipend for food and housing. For instance, Ryan Hill, a fourth-year Ph.D. student at MIT, receives a $30,000 living stipend and a tuition waiver allowing him to forego paying $50,000 in tuition. He currently pays taxes on his $30,000 stipend, but under the proposed House tax bill, his tuition waiver would also be taxed—meaning he would be taxed as if he was earning $80,000 a year.”

In total, the House GOP tax plan would raise taxes by 400 percent on many graduate students, the Harvard Crimson estimated.

Such a tax on students who are already drowning in loan debt “would be devastating,” Samantha Hernandez, legislative director of the National Association of Graduate-Professional Students, told Wired“I monitor all legislation at the state and federal levels that could affect graduate and professional students, and this is just—this would have the greatest negative impact of anything I’ve seen.”

Historian Nick Kapur pointed to his own experience as a PhD student and described the proposed tax hike as “the height of Republican insanity.”

The $1.5 trillion cut is also back.

On Capitol Hill, Republican lawmakers are moving closer to pass a sweeping $1.5 trillion tax cut that largely benefits the wealthy and the nation’s largest corporations. The House passed its version of the bill on Thursday by a vote of 227 to 205. Thirteen Republicans joined Democrats in opposing the legislation. The massive tax cut was approved without the House holding a single hearing. Hours later, the Senate Finance Committee approved its own version of the bill, but it is unclear if the Republicans have enough votes for it to pass the full Senate. One of the biggest beneficiaries of the tax bill may be President Donald Trump’s own family. An NBCNews analysis based on his 2005 tax return found Trump would personally save $20 million under the House bill, while his heirs could save $1.1 billion. Meanwhile, the Senate plan will actually result in higher taxes for workers who earn less than $75,000 by 2027, according to a new analysis by the Congress Joint Committee on Taxation.