Worst U.S. Economic Legislation in Decades Set to Pass

The Republican tax scam will go down in history as an utter atrocity. The interests of the general public are betrayed in favor of giant corporations and the super rich. Since the scam only has to pass the Senate now, U.S. citizens should call their senators at (202) 224-3121 and tell them to vote no.

The analysis by American for Tax Fairness (ATF)—a coalition of more than 425 groups that advocate for progressive tax reform—found that the Republicans’ plan would give more than 80 percent of tax cuts to the nation’s richest one percent while also—among other things—raising taxes on 92 million middle-class families; increasing healthcare premiums; encourage outsourcing of U.S.-based jobs; and limiting deductions for state and local taxes.

ATF’s analysis warns that the GOP’s proposed legislation:

  1. Gives 83% of the tax cuts to the richest 1% by 2027. The richest 1% of taxpayers will get one-fifth (21%) of the tax cuts in 2018, but that grows to 83% by 2027. Their tax cut will average $51,000 in 2018; the bottom 60% of taxpayers will get about a dollar day. [Tax Policy Center (TPC)]
  2. Raises taxes on 92 million middle-class families by 2027 to pay for tax breaks for the wealthy and corporations. That is more than one-half (57%) of all households making less than $200,000 a year. 69 million households making less than $100,000 a year would also pay more in taxes after the temporary tax cuts for individuals expire. [TPC]
  3. Mandates automatic Medicare cuts of at least $25 billion in 2018 and $400 billion over 10 yearsIn effect, seniors will pay for tax breaks for corporations and the wealthy as automatic spending cuts are triggered because the tax cuts add $1.5 trillion to the national debt. Automatic cuts altogether will total $136 billion in 2018 and include reductions in agriculture subsidies, student loans, military retirement and more. [Congressional Budget Office (CBO)]
  4. Increases health care premiums and leaves 13 million families without health coverage, to raise revenue for tax breaks that mostly benefit the wealthy and corporations.
  • The plan repeals a key part of the Affordable Care Act: the requirement for individuals to have health coverage if they can afford it. That makes $314 billionavailable for tax cuts. [Joint Committee on Taxation (JCT)]
  • This will lead to 13 million more people being uninsured and cause a 10% increase in health insurance premiums for people getting insured on the individual market. [CBO]
  1. Provides a corporate tax rate cut of $1.4 trillion and makes those cuts permanent, but makes tax cuts for individuals and families temporary. [JCT]
  • The corporate tax rate is slashed from 35% to 21%, and the corporate Alternative Minimum Tax (AMT) is eliminated.
  • The $1.4 trillion corporate-tax-rate cut is nearly equal to the $1.5 trillion by which the whole tax plan increases the national debt, and to the $1.5 trillion cut the Republican budget makes to Medicare ($473 billion) and Medicaid ($1 trillion). [Center on Budget and Policy Priorities (CBPP)]
  • Tax cuts that benefit working families will expire after 2025. However, one individual tax cut made permanent changes the way tax brackets are adjusted for inflation, resulting in growing tax increases over time. [CBPP]
  1. Adds $1.5 to $2.2 trillion to the national debt, jeopardizing critical services. The plan includes at least $1.5 trillion in tax cuts that are not paid for, such as by closing loopholes used by the wealthy and corporations. [JCT] Because the bill contains several budget gimmicks that obscure the true cost of the tax cuts, the cost could be as much as $2.2 trillion. [CBPP] This will balloon the national debt and further endanger funding for Social Security, Medicare, Medicaid, public education and more.
  2. Prioritizes the wealthiest taxpayers over working families with children. The plan lowers the top individual tax rate from 39.6% to 37%, giving more tax cuts to the richest 518,000 households. The GOP chose not to fully adjust changes in the Child Tax Credit so that some 24 million children in working families could fully benefit. Both of these changes would cost roughly the same amount, about $80 billion over 10 years. [Institute on Taxation and Economic Policy (ITEP), CBPP]
  3. Prioritizes wealthy business owners and real estate developers like Donald Trump. They get a net $265 billion tax cut from a new 20% deduction for “pass-through” business income combined with a tightening of rules on losses. Applied to the new 37% top individual tax rate, this 20% deduction on business income will drop the top pass-through business tax rate from 39.6% to 29.6%. More than 80% of this tax cut will go to the top 5% in 2019. Trump owns more than 500 pass-throughs. Pass-through owners—which include sole proprietorships, partnerships, LLC’s and S corporations—pay taxes due on their business income on their personal returns at individual rates. [JCT, ITEP]
  4. Kills American jobs by encouraging outsourcing and profit shifting. The plan creates a territorial tax system, which exempts foreign profits from U.S. taxes. While the plan will tax some of those offshore profits, the effective tax rate will be far below the U.S. rate. U.S. multinationals will have even more tax incentives to outsource more jobs and shift more profits offshore.
  5. Hands a $400 billion tax cut to offshore tax dodgers. American corporations have $2.6 trillion in profits stashed offshore on which they owe $750 billion in U.S. taxes. Rather than make them pay what they owe, like all the rest of us do, the tax plan will charge them only $339 billion—over a $400 billion discount. Apple will save $44 billion and Microsoft $25 billion, based on their Securities and Exchange Commission tax filings. [ITEP]
  6. Limits the federal deduction for state and local taxes (SALT), hurting the middle class. The bill caps at $10,000 the amount of state and local property and income or sales taxes that can be deducted from federal taxable income. This is one of the reasons that nearly 8 million families will see tax increases in 2018. The impact of this change will be felt especially in the 20 states that claim an average SALT deduction of more than $10,000. Limiting SALT will put pressure on state and local budgets, likely forcing cuts to education, health care, and infrastructure. [TPC, CBPP]
  7. Lets many wealthy heirs avoid paying the estate tax. The estate tax is substantially weakened, losing $83 billion and allowing very rich families to inherit wealth tax-free. Under current law, the tax only applies to estates worth over $5.5 million per person or $11 million per couple—about 5,500 estates. Under the bill, only estates worth at least $11 million per person or $22 million per couple (about 1,800 estates) would pay the tax. [JCT, TPC, CBPP]
  8. Enriches President Trump and his family. In addition to cutting the top individual income tax rate and creating a tax break for income from pass-through business entities (of which Trump owns 500), the bill preserves the many existing tax loopholes for real estate investors and even creates a new one. The final bill exempts real estate owners from a provision meant to limit abuse of the new pass-through income deduction. [ITEP]

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.