The tax plan is widely hated
Wealthy campaign donors would be the only beneficiaries
Looking at reactions to Republican tax plans, I thought back to what people used to say about former Sen. Phil Gramm, whose presidential ambitions never went anywhere but who did help cause the 2008 financial crisis: “Even his friends don’t like him.”
So it is with GOP tax “reform,” especially the Senate version, which would raise taxes on most individuals, especially in the middle and working classes, and add around 13 million Americans to the ranks of the uninsured, all to pay for big cuts in corporate taxes. The public strongly disapproves — by a 2-1 majority, according to Quinnipiac. But at least CEOslike the plan, right?
Not so much. A few days ago, Gary Cohn, Donald Trump’s chief economic adviser, met with top executives. Only a handful raised their hands when asked if lower taxes would lead them toraise capital expenditures.
You see, CEOs live in the realworld of business, not the imaginary world of rightwing ideologues, and they know that tax rates aren’t that important in investment decisions. So they realize that even a huge tax cut wouldn’t stimulate much more spending.
And with that realization, the rationale for this tax plan falls apart, leaving nothing buta scheme to make the rich richer at everyone else’s expense.
Still, the Trump administration and its allies claim that cutting taxes on corporate profits would lead to an explosion in private investment and faster economic growth, and that the fruits of this growth would trickle down to American workers in the form of higher wages. Then, rising incomes would increase tax receipts, so the tax cuts would pay for themselves!
Even if any part of this story were true, there would be side consequences they don’t bring up. Where would a big increase in capital expenditure come from? Nothing in the bill would make Americans consume less and save more to invest. So the money would have to come from abroad — from selling stocks,bonds and other assets to foreigners on a massive scale.
This inflow of foreign money would drive up the value of the dollar and lead to huge trade deficits: more than $6 trillion over the next decade. These trade deficits would have a devastating effect on manufacturing — remember those jobs Mr. Trump promised to bring back? — to the tune of some twomillion jobs lost.
As for economic growth: Foreign investors would take their profits home, so most of any growth we would get from cutting corporate taxes would accrue to the benefit of foreigners,not Americans.
Most economic analyses agree with the CEOs who disappointed Gary Cohn: Corporate tax cuts wouldn’t do much to raise investment. They would, however, explodethe budget deficit.
So, in an attempt to limit that deficit blowout, Senate Republicans propose significant tax increases on working families. According to Congress’ Joint Committee on Taxation, taxes would rise on average for every group with incomes under $75,000 a year. The only significant winners would be those making more than $1 million a year.Populism!
Oh, and this doesn’t even account for the health care sabotage. By repealing the requirement that people buy insurance, the Senate plan would cause 13 million to lose coverage; that loss of coverage, and the associated government subsidies, is why mandate repeal would save money to give to corporations. This move also would drive up premiums for those who keep their insurance, because the dropouts would tend to be those with lower health care costs. So that’s an additional, hidden indirect taxon the middle class.
And, by the way, tax-cutinduced deficits would, by law, trigger cuts in Medicare, and this would just be the start of a GOP assault on programs such as disability insurance that provide a crucial safety net for working-class Americans.
Why are Republicans trying to do this? It’s bad policy and bad politics, and the politics will get worse as voters learn more about the facts. Well, last week one GOP congressman, Chris Collins of New York, gave the game away: “My donors are basically saying get it done or don’t ever call me again.”
So we’re talking about government of the people, not by the people, but by wealthy donors, for wealthy donors. Everyone else hates this plan — and they should.