There are only two certainties in life, it is said: death and taxes. Science may one day take care of death. Republicans want to take care of taxes.
This week, congressional Republicans will take the first steps to cut taxes for many Americans, mostly the wealthiest individuals and the largest corporations. They will approve a procedure by which the Senate can pass tax cut legislation with no Democratic votes. If this sounds familiar, it is; it is the same process Republicans tried to use to repeal the Affordable Care Act just a few weeks ago. They failed then, but this time the odds may be on their side.
While we don’t yet know the details of the Republican tax cut plan, an outline of their thinking was released publicly last week. The plan calls for significant cuts to corporate tax rates, as well as many provisions that would change the federal tax code to save trillions, yes trillions, of dollars for the richest individuals in the country, including Donald J. Trump.
One might justifiably ask why anyone would want to do that. After all, the income disparity in the United States is greater than in most every other country on Earth, and it is getting larger. Just a few decades ago, the wealthiest 1 percent of Americans earned about one-fourth of all national income. Today it is close to 40 percent. The ideas being considered by congressional Republicans, and supported by President Trump, would make their take even greater; one estimate is that half of all the benefits of the proposed cuts would go to that group.
Republicans haven’t tried to rationalize this boon to the rich, and that’s to be commended, because they can’t. They insist they are focused on cutting taxes on the middle class, not Mr. Trump. In fact, both the president and Treasury Secretary Steve Mnuchin have said publicly, and dishonestly, that they wouldn’t benefit. (One analysis by the non-partisan Tax Policy Center, based on Trump’s official financial disclosure, found he would save only $76 million annually.) By contrast, the average middle class American could save about $600 a year.
I don’t make nearly as much as Trump, but I roughly calculated that I would save about $100,000. Would I like that? Sure, but I can’t justify it, because unless the government has tons more money than it needs (pause for hearty laughter), if I get a cut, and Trump and other rich people do too, the government will go deeper into debt. In fact, most estimates but the addition to the debt in the range of $1.5 trillion to $3 trillion over the next 10 years.
I also can’t justify a cut on the basis that I might somehow create enough economic activity that everyone else might benefit. The last time federal taxes were cut was in 2003, the year I sold LEO to a company out of Pennsylvania. Because Congress cut the tax on capital gains — about three months after the sale — I saved about $50,000. What did I do with the money I saved? I ran campaign ads during the 2004 Presidential election explaining that the tax cuts were inappropriate, and that I was using the money I saved from the Bush cuts to endorse his opponent, who didn’t support that type of largesse for the rich.
Republicans like to use the “broader benefit” argument to rationalize cuts for corporations. They say the cuts would stimulate huge economic expansion that would actually increase revenue to the government. That is an article of faith for them.
Guess what? Fake news! There is no evidence that tax cuts for businesses result in a more vibrant economy. Didn’t after the Bush cuts. Really never have.
The Federal Reserve says any growth would be minimal. Goldman Sachs, Mnuchin’s former employer, says maybe up to a two-tenths of 1 percent. Bruce Bartlett, the man who wrote Reaganomics, which codified the trickle down theory, told Congress last week that he now thinks that is “bullshit.”
You would be hard pressed to find any nonpartisan economist who believes that tax cuts pay for themselves through additional economic growth. But that doesn’t faze President Trump or congressional Republicans. They believe what they believe, and they may have the votes to pass what they want to pass.
So next year, when you are figuring out how to splurge with the $600 you might be saving on your federal taxes (a meaningful amount for many, to be sure), just think about the difficulty President Trump will have trying to spend his $76 million bonus. Maybe some more extra-long red neckties. •
U.S. Rep. John Yarmuth, founder of LEO, has represented Kentucky’s 3rd Congressional District since 2007 and is the top Democrat on the House Budget Committee.