Don’t be fooled by GOP’s tax promises

I have to disagree with Gov. Scott Walker: The president’s tax plan won’t help small businesses and entrepreneurs.

It will hurt them while bestowing huge rewards on big businesses and the very rich.

Under the plan, a typical small business would end up paying the same or higher taxes than it currently does. The so-called pass-through provision, taxing small businesses at 25%, wouldn’t help 85% of small-business owners whose incomes are already low enough to enjoy a tax rate of 25% or less.

It would hurt freelancers, smallbusiness owners and other entrepreneurs who are now taxed at rates of 10% and then 15% on their profits if their total income puts them below about $125,000 annually. The new tax plan would tax these same businesses at 25% on about one-third of their profits.

Many of the businesses that would use the pass-through provision aren’t really small. Trump’s family businesses, for example, would be major beneficiaries.

As the National Federation of Independent Business, a lobbying group representing small businesses, says, “this bill leaves too many small businesses behind.”

A second problem with the tax plan is that small businesses and entrepreneurs invest and expand only when demand for their goods and services grows, or is likely to.

Such demand comes from the middle class and poor, who spend all or nearly all their income. The rich don’t spur much demand because they spend a much smaller portion of their income.

But according to a slew of analyses, including Congress’ own Joint Committee on Taxation, the tax plan will raise taxes on many middle-class families. This will reduce their spending.

By the Republicans’ own admission, the plan also will require cuts in government programs that middle- and lowerincome Americans depend on, such as Medicare and Medicaid. They’ll have to spend more on health care — thereby reducing their spending on everything else even more.

A third problem for entrepreneurs and small businesses is that, as congressional Republicans readily admit,

the plan would explode the national debt by at least $1.5 trillion. This would eventually force many small businesses and entrepreneurs to pay higher interest on loans they need to invest and expand.

By contrast, the tax plan would give American corporations a $2 trillion tax break, at a time when big companies are enjoying record profits and stashing cash in offshore tax shelters.

And it would give America’s wealthiest citizens trillions more, when the richest 1% now hold a record 38.6% of the nation’s total wealth, up from 33.7% a decade ago.

These tax cuts won’t “trickle down” to small businesses, entrepreneurs or average Americans. Trickle-down economics has proven a cruel hoax. Presidents Ronald Reagan and George W. Bush slashed taxes on the wealthy and nothing trickled down. The median wage of the bottom 80% went nowhere.

President Donald Trump’s tax reform plan is nothing more than a payback to the GOP’s richest donors. When they bankrolled Trump and the GOP, they expected a return on their investment.

Last week, Gary Cohn, Trump’s lead economic adviser, conceded in an interview that “the most excited group out there are big CEOs, about our tax plan.” Republican Rep. Chris Collins admitted that “my donors are basically saying, ‘Get it done or don’t ever call me again.’” Republican Sen. Lindsey Graham warned that if Republicans failed to pass tax reform, “the financial contributions will stop.”

Don’t be fooled. The president’s tax plan won’t help entrepreneurs and small businesses. It’s a windfall for big businesses and the rich — who don’t need it.

Robert B. Reich is a professor at the Goldman School of Public Policy, University of California-Berkeley. His new documentary, “Saving Capitalism,” comes out on Netflix on Nov. 21.