Tax bill could come back to bite Republicans
There is no denying that pushing the massive tax cut plan through Congress was a major policy victory for President Donald Trump and the Republican majorities in the House and Senate. House Speaker Paul Ryan, R-Wis., in particular, has long pursued major corporate tax cuts, driven by a fervent faith that those corporations will invest in American workers.
This triumph is a culmination of the Republican fight to allow the rich and powerful to invest in the political system without constraint or accountability. The U.S. Supreme Court codified that strategy with among its most egregious decisions in its history — Citizens United v. Federal Election Commission — which treated corporations as people and ruled that laws limiting their ability to pour money into campaigns violated free speech.
Led by the likes of the Koch brothers, these powerful interests have had great success electing conservative Republicans at the state and federal levels, in the process cutting taxes, making life difficult for unions and repealing regulatory controls on corporate abuses.
Now this, a corporate tax-rate cut from 35 percent to 21 percent, the creation of loopholes that will allow wealthy individuals to avoid the higher personal tax rate by redefining themselves as a corporate entity, and adding $1 trillion or more to deficit projections, triggering cuts to Medicare and potentially Social Security and Medicaid, also Koch targets.
Republicans may find they were too successful.
Americans may not know the details, but they sense when they are being fleeced. There is no evidence that enriching corporations will translate to significantly better wages for low- and middle-income earners. After the President George W. Bush tax cuts, the gap between the haves and have-nots only widened.
The wealthiest 1 percent now control 40 percent of the nation’s wealth, the bottom 90 percent just 27 percent, numbers not seen since before the Great Depression.
A recent Wall Street Journal/NBC poll found only 24 percent consider this tax bill a good idea, 63 percent see it as benefitting primarily the rich and corporations — which it does — and only 7 percent see it as helping the middle class.
Average Americans also have an innate sense that something is rotten when one party, unable to get any votes from the opposition, has to force a policy through Congress without losing any support from party members — making side deals and concessions to keep votes lined up in the process.
This circumstance haunted Obamacare. Despite its promise of universal health care, voters were wary and its poor poll numbers reflected that. Complex and slow to roll out, the Affordable Care Act led to devastating losses in the 2010 congressional election for Democrats. Republicans could well face the same fate in 2018.
This is not to say there will be no benefit to the middle class. The bill doubles the standard deduction for couples to $24,000, meaning far fewer taxpayers itemizing. Even in high-tax Connecticut, most middle-income households will not be hurt by the limits on deducting state income and local property taxes, because they won’t exceed the $10,000 cap on those deductions.
And given the massive tax cuts for corporations and the very rich, the extra cash made available will drive the markets and economic expansion.
The problem is that these tax cuts were so skewed to benefit the already comfortable and do comparatively little, in comparison, for the working class, including the millions without college degrees. These are people who Trump promised not to forget, to again provide growing wages and renewed communities.
Instead, expect corporations to take much of this windfall and finance dividends and share buybacks — and fatten executive compensation — rather than invest in productive economic activity or increased pay and benefits.
Or maybe Ryan’s faith is well placed (though even in that case the benefits may not accrue in time to save Republicans in the 2018 congressional election).
Maybe these tax cuts will drive down the already low employment rate of 4.1 percent, lead to wage growth, expand the economy so greatly that the tax cut will pay for itself and reopen those factories in the Rust Belt where voters gave Trump a chance to make their America great again.
Or maybe it will awaken the American people to the fact that the Republicans in Washington, and their Koch benefactors, don’t have their best interests in mind. An engaged electorate can defy expectations and overcome moneyed interests. The nation saw that in Alabama.
A working-class that turns to a progressive response to the accumulation of wealth is certainly not the White Whale that Speaker Ryan has long chased. But, with this tax bill, it may have been the one he speared.
The editorial board is composed of the publisher and four journalists of varied editing and reporting backgrounds. The board's discussions and information gained from its meetings with political, civic, and business leaders drive the institutional voice of The Day, as expressed in its editorials. The editorial department operates separately from the newsroom.
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