The shine is already wearing off the Donald Trump-Paul Ryan tax cuts so extravagantly wrapped and presented as a Christmas gift to America last December 22.
As a lumber-yard worker bitterly summed it up, “He’s [Trump] pulling out jazz hands and shiny stuff up front and will screw us on the back end.”
“He’s pulling out jazz hands and shiny stuff up front and will screw us on the back end.”
Trump and Ryan promised that the tax cuts would boost incomes by $4,000 to $9,000 a year for typical families, in part by lowering the corporate tax rate from 35 percent to 21 percent, thus stimulating job creation and unlocking corporate generosity on pay. (Former President Obama and other Democrats helped set the stage for this tax rate decrease by advocating a cut to the corporate tax rate to 25 percent, but while also closing loopholes.)
Trump and Ryan neglected to mention that the tax cuts for U.S. companies, millionaires, and billionaires would be permanent and massive (the Koch brothers, for example, are expected to save $1.4 billion in taxes). By 2027, the top 1 percent will be gobbling up 83 percent of tax cuts. Meanwhile, cuts for working families would be temporary and modest at best.
Contrary to the promises of Trump and Ryan, the tax cuts for working people are actually “so small they could be erased by your rising health-insurance premiums,” as Eric Levitz noted in New York magazine. The average tax break for someone making $25,400 a year or less will yield just $60, and a majority will pay more by 2027.
In February, Paul Ryan proudly tweeted about a Pennsylvania school secretary gushing gratitude for her whopping $1.50-a-week increase in take-home pay. The tweet launched such a storm of derision that a red-faced Ryan soon deleted the post.
As the full effects of the tax plan emerge, average Americans are starting to learn precisely how unequal the tax cuts really are.
During the run-up to the passage of the tax bill, meaningful debate and the presentation of credible data to Congress were suppressed by the refusal of Ryan and Majority Leader Mitch McConnell to hold meaningful hearings. But now real-world outcomes are emerging. Here are a few of key findings:
- Incentives for Offshoring: Trump proclaimed that the tax cuts would stimulate millions of new jobs located in the U.S., but his tax bill actually incentivizes U.S. corporations to continue to move production to low-wage sites like Mexico and China. The Congressional Budget Office has found that two provisions meant to encourage corporate profit repatriation may end up incentivizing corporations to locate tangible assets––machinery and buildings––abroad. As a result, supposed CEO “job creators” are in fact encouraged to create more “job craters” by transferring assets and jobs offshore.
- Only a Few Benefit: Despite promises that a corporate tax cut would trickle down to worker’s pocket books, a mere 4.3 percent of U.S. workers will be receiving a one-time bonus or wage increase this year, Americans for Tax Fairness reported.
- And, For These Few, Not Very Much: The value of one-off bonuses and wage increases are a tiny fraction of corporate gains from the tax cuts. Corporations are receiving nine times as much in tax cuts as they are giving out to workers in bonuses or pay hikes.
- Corporations “Invest” in Themselves: The corporate tax cuts have not ignited any vigorous uptick in job-creating investment, but have encouraged corporations to buy back more of their own stock. This has allowed them to raise their stock prices and boost the earnings of the top executives and rich investors. Corporations are devoting thirty-six times as much on stock buybacks than to one-time bonuses and wage increases for workers, the Americans for Tax Fairness found.
- The Debt is Larger than Ever: Rather than the original $1.5 trillion price tag used by Republicans during congressional “debate,” an April 2018 report by the Congressional Budget Office disclosed that the Trump-Ryan tax plan will eventually cost $1.9 trillion by 2028. Ryan and other Republicans hope to use this deepening budgetary hole as a grave to fill with cuts in programs like Medicare, Medicaid and Social Security.
The Trump-Ryan deal, enacted despite being supported by only 26 percent of Americans, enjoyed a brief blip upward to 39 percent in the wake of the noisy Republican celebration of their only legislative victory in 2017. But public support has since melted. In March, a Quinnipiac poll found support for the tax law fell by three points to 36 percent, while opposition climbed to 50 percent.
For Democrats seeking to root out Congressional Republicans in November, repealing the tax cuts for corporations and the super-rich will likely be a campaign focal point. But re-earning the faith of working Americans will require Democrats to fully repudiate the widely propagated mythology about “too-high” corporate taxes and talk instead about repealing the tax breaks for Corporate America and the top 1 percent. Are the Democrats truly ready for these bold steps?
Roger Bybee, a frequent contributor to The Progressive, is a freelance labor journalist and labor-studies instructor based in Milwaukee, Wisconsin, and the former editor of the Racine Labor weekly.