The US middle class is hurting? Cut taxes for the rich!
The incoming train-wreck that is the Republican tax plan has a bizarre solution for a very real problem, and the oddest thing is, they might get away with it.
The problem is simple. All the benefits of the much-ballyhooed globalisation in recent years have accrued to the very few at the top, while vast swathes of the US population are seething as manufacturing jobs have disappeared. This pain is acute for the most devoted demographic cohort of President Donald Trump—namely, the people described by pollsters here as non-college educated white.
The Republican Party is reeling. After a year of having control of both houses of Congress as well as the presidency, they have failed to get any significant legislation passed. So, they figured they need to get some legislative achievement when they face voters next year.
So far so good.
However, they seriously err if they think they'll get away with passing any legislation. This is a point to which I will return.
Earlier, Republicans stumbled when it came to passing a law to repeal healthcare. After all their grandstanding during the Obama years of repealing and replacing President Barack Obama's landmark healthcare law, when push came to shove, they lost their nerve. For good reason, too, because despite all the political posturing, most Republican lawmakers realised that robbing tens of millions of people of health insurance would come back to bite them come election time.
So, what to do? Republicans decided to do something even more complicated—take on tax reform. Their modus operandi remained the same as their ill-fated attack on Obamacare—stealth and speed. Add to this a monstrous dollop of mendacity.
What's so striking about this is the sheer irresponsibility of the exercise. Tax reform is complicated and devilishly hard because it inevitably results in vicious infighting as powerful interests try to protect their favourite loopholes.
Real tax reform is a completely different beast. It last happened in the US in 1986, the result of much hearing, discussions, debate and horse-trading between Republicans led by President Ronald Reagan and Democrats led by, among others, House Speaker Tip O'Neill.
What a far cry from today. The Republican tax bill, over 500-pages, has been put together without a single hearing, and is being rushed through Congress. The New York Times editorial headline says it all: "The Senate Is Rushing to Pass Its Tax Bill Because It Stinks."
And how.
According to the non-partisan Congressional Budget Office, households earning more than USD 1 million a year stand to gain, on average, nearly USD 60,000 in 2019 from the tax plan—meanwhile, those making under USD 30,000 will actually pay higher taxes. By 2027, all households earning less than USD 75,000 will (on average) be paying more of their income than they do currently.
The upshot of all this is that the Republicans have managed to create a tax bill where a lot of the middle class will see their taxes go up after a few years and yet the plan leaves a trillion-dollar hole, according to CBO.
The big question is why? Here's where Republican mendacity comes in.
Why do corporate coffers, already swimming with cash, need a fresh infusion? Apparently—according to the altered reality of Republican la-la land—this will induce corporations to invest and unleash a torrent of new jobs.
This appears to be news to America's CEOs.
"Major companies including Cisco Systems Inc., Pfizer Inc. and Coca-Cola Co. say they'll turn over most gains from proposed corporate tax cuts to their shareholders, undercutting President Donald Trump's promise that his plan will create jobs and boost wages for the middle class," Bloomberg reported.
John Shin, a foreign-exchange strategist at Bank of America Merrill Lynch, who conducted a survey of more than 300 companies asking their plans for a tax overhaul, told Bloomberg: "Companies are sitting on large amounts of cash. They're not really financially constrained."
As for that wonderful economic boom that will help the tax bill pay for itself?
The University of Chicago's Booth School of Business runs an ongoing survey of top economists spanning a wide number of specialties and political outlooks. The panel includes multiple Nobel Prize winners, White House veterans, and former presidents of the American Economic Association. Recently, they were asked about the Republican tax reform bills. Out of 42 top economists, only 1 believed the GOP tax bills would help the economy. All of them thought it would increase the debt.
The only glimmer of hope is that for all their stealth and speed, the Republicans haven't been able to fool the public.
Polls show the public think the bill stinks.
Since 1980, a plurality of voters has approved of every major tax cut that Congress has considered. Yet, according to Gallup, Americans currently view the GOP plan more negatively than they did the tax hikes passed under Bill Clinton and George H W Bush.
So, Republicans might yet get their just desserts in elections come November. They will richly deserve it.
Ashfaque Swapan is a contributing editor for Siliconeer, a monthly periodical for South Asians in the United States.
Comments