The fraudulent, now-shuttered Trump University—notorious for fleecing its students—is the perfect metaphor for the Donald Trump-Paul Ryan $1.7 trillion tax plan, heavily tilted toward corporations and the rich.
While loudly advertised by Republican supporters as presenting massive benefits to the “middle class,” the plan offered by the House, in fact, heightens the tax burdens of a huge swath of ordinary Americans over the next decade. At the same time, it very effectively redistributes income upward toward those at the very top.
Under the House version of the plan, the top 1 percent will receive an average of $64,720 a year by 2027. According to analysis of the plan released November 8 by the Tax Policy Center, taxpayers in the top 1 percent would receive nearly 50 percent of the total benefit. An even more select group, earning $5 million or more, would rake in an average annual tax cut of almost $300,000 once the bill was fully phased in.
As for the bottom 80 percent—they are worthy of only a tiny share of the tax reductions. As much as 45 percent of middle-income taxpayers would face tax increases. Several special tax credits inserted to help sell the plan, will either expire or atrophy due to inflation such that by 2027, middle income families with children will see a significant increase in their taxes.
Clearly, such a flagrantly skewed giveaway to corporations and the rich will be hard to sell, despite the Republican’s lust to rack up a legislative victory after a year without substantial accomplishments. The Trump-Ryan plan could meet the same fate as that of Republicans’ attempts to wipe out the Affordable Care Act, an effort that garnered only 17 percent support among the public. The House tax “reform” plan has 45 percent support among registered voters who know about the plan, according to a POLITICO/Morning Consult poll released November 9, with a steady 36 percent believing it a bad idea, (and that does not include voters who said they haven’t kept up with the complex, fast-changing scheme).
“For what is a major legislative objective of the President and his party, tax reform is in very mushy shape.”
“For what is a major legislative objective of the President and his party, tax reform is in very mushy shape,” commented Republican pollster Bill McInturff.
Tuesday’s Democratic victories, especially in Virginia, will likely generate second thoughts about the tax cuts among Republicans up for reelection in 2018. Nonetheless, Trump, Ryan, and Republican leaders in Congress have been promoting their plan with the same zeal that Trump used to persuade ordinary citizens to sign up for his bogus university.
The entirely mythical claim of ultra-high tax rates impeding the ability of U.S. corporations to compete without sending jobs and capital overseas has considerable momentum; even Barack Obama repeated it frequently in his second term.
In fact, a 2014 study by Citizens for Tax Justice examining five years of data found that Fortune 500 companies paid an average federal effective corporate income tax rate of only 19.4 percent, just over half the nominal U.S. statutory rate of 35 percent. That same study found that many profitable, large U.S. corporations such as Boeing, General Electric and Verizon paid no federal corporate income taxes at all.
The Republicans heavily tout the increased family deduction as evidence of their concern for middle-class families. But this new tax credit phases out after just five years, while of course the tax cuts for the ultra-rich become much more generous over the next decade. Overall, “The middle fifth of income-earners would receive an average tax cut of $750 in 2018, which would fall to $460 in 2027.”
Shamelessly, while raising the income tax for lowest-income citizens from 10 percent to 12 percent, the plan adds many features which will allow the uber-wealthy to pay far lower than the meaningless official top rate of 39.6 percent. These include eliminating the alternative minimum tax (which prevents millionaires and billionaires like Trump from escaping any taxes), easing the setup of “pass-through” corporations through which high-income earners can sharply reduce their taxes, and axing the estate tax.
Meanwhile, corporations would benefit hugely from a slash in their tax rates from 35 percent to 20 percent. The status of the taxation of their foreign operations remains up in the air as of this writing. In particular, Trump claims that eliminating the estate tax is essential to protect the families of “family farmers” upon their passing. This claim is utterly specious, as tax expert David Cay Johnston points out: “Fewer than 5,000 of them [the 2.5 million Americans who die each year, and have individual fortunes of at least $5.49 million] pay any estate tax….Only 80 of those 5,000 taxable estates include farm property—and they are gentleman farmers like Ted Turner . . . not yeoman farmers working tractors.”
The President defended the elimination of the estate tax by saying it was desperately needed to offset costs for the super-wealthy who otherwise stand to be severely punished by other provisions of his tax plan. In one of his more bizarre moments, Trump announced, “the deal is so bad for rich people, I had to throw in the estate tax just to give them something,” apparently oblivious to all the other features benefitting the super-rich and the corporations they own.
House Speaker Paul Ryan’s incessant claim that the tax plan will produce “bigger paychecks” is a ploy to lure support from working people and small businesses. But his argument is laughably weak.
First, it relies upon the fantasy that taxpayers will see $4,000 to $9,000 in additional family earnings, a pipe-dream that ignores the fact that workers’ incomes kept dropping or stagnating during major tax cuts under Reagan and George W. Bush.
Ryan is also asking us to believe that corporations rolling in new wealth generated by the tax cuts will gratefully pass along their increased profits to long-suffering workers. In fact, corporations including General Electric, Boeing, and Caterpillar have been cutting wages and benefits for U.S. workers even while at peak levels of profitability (and paying a tiny share of U.S. taxes).
Ryan is also asking us to believe that corporations rolling in new wealth generated by the tax cuts will gratefully pass along their increased profits to long-suffering workers.
In the absence of a strong union voice to collectively demand wages commensurate with profits and productivity, Ryan’s promises are nakedly false. Among the many ways the proposals will hurt working-class and middle-class families are provisions to:
Severely limit state and local tax exemptions, which Republicans see as a means of punishing states with relatively high taxes to fund good public schools, health care, and a clean environment.
Increase taxes for families that have at least one child and make less than $100,000, according to the Tax Policy Center.
Eliminate the exemption for expenditures on health care. This would be a cruel, devastating blow to families who are burdened with the high cost of caring for elderly, disabled, and chronically-ill family members.
Nix the child-adoption tax credit—nothing less than gross hypocrisy from a party that so constantly speaks of its devotion to family values and pushes adoption as an alternative to abortion.
End the individual mandate for the Affordable Care Act, a provision representing one more effort in the unceasing battle to undermine the ACA without offering any viable alternative.
Dump the deduction for certain educational expenses, making graduate school much more expensive for low and moderate-income students.
While the Trump-Ryan tax extravaganza is in constant flux as legislators add or slash provisions to prevent Republican defections, all the changes will be occurring behind closed doors.
While the Trump-Ryan tax extravaganza is in constant flux as legislators add or slash provisions to prevent Republican defections, all the changes will be occurring behind closed doors. Ryan and the Republicans have shown no interest in holding hearings on the 1,000-plus page $1.5 trillion bill. As with their failed efforts to destroy the Affordable Care Act, the Republicans have adopted the “budget-reconciliation” rule requiring only fifty-one votes instead of the normal sixty in the Senate.
Thus, the Republicans’ fervent fight for more economic inequality coincides with efforts to suppress the normal democratic procedures of Congress. This should serve as a reminder of how the Grand Old Party’s efforts to foster plutocracy pose a deep threat to democracy.