Simplifying the Tax Code, or Simply Trickle-Down Economics?


November 30, 2017

Editor’s note: The following article, reported by Kalena Thomhave, appears today in the American Prospect. It reinforces many of our own arguments against the GOP tax proposals.
Senate Republicans may try to quickly move their tax proposal to a vote this week, attempting to score the GOP’s first legislative victory before the opposition can thoroughly mobilize. It’s a nightmare bill, and most Americans don’t support the tax reform proposal (though of course, wealthy Republican donors do). This isn’t surprising, since the tax plan is a tax cut for the rich, and stands to hurt  the poor by threatening their health care as well as essential social programs.

Back when Trump revealed the original GOP plan, he said he wanted to “make the tax code simple, fair, and easy to understand.” To simplify the tax code, Republicans have trumped up their (not quite) doubled standard deduction, while eliminating personal exemptions and other deductions (which the increased standard deduction may not completely offset).

But the effect of these individual changes is slight when compared with the key piece of the tax plan, the massive tax cuts for corporations, lowering their tax rate from 35 percent to 20 percent. In this case, the tax proposal is very simple: simple, trickle-down Reagonomics.

All of this means adding $1.4 trillion to the deficit over the next ten years, in order to boost up corporations and the wealthy.

To make up for the loss of revenue, Republicans may turn, as they’ve repeatedly done before, to gutting the social welfare programs that the poor rely on. Indeed, Trump indicated that after tax reform, he would like to move on to welfare reform. Considering that welfare has already been reformed into almost nothing, one can imagine that Trump may be looking to target programs like Medicare, Medicaid, nutrition assistance programs, and other vital programs that primarily help low- and middle-income people.

Republicans say that the increased deficit isn’t something to blink at because the tax cuts will, in the words of Republican Senator Pat Toomey of Pennsylvania, “encourage a really strong period of economic growth.” But according to a Tax Policy Center analysis of the recently passed House proposal, that growth will not be anywhere near enough to pay for the legislation. Through the next decade, the $1.4 trillion plan’s cost would be reduced by $169 billion in spurred economic output—or by about 12 percent.

Enter the deficit hawks (suspiciously quiet now) who may target—what else?—the social safety net.

After the Bush tax cuts of 2001 and 2003, his administration attempted to massively curtail Medicare spending. In 2012, Kansas, under conservative Governor Sam Brownback, introduced huge tax cuts to the wealthy, too, slashing social spending and creating a crisis for the state. And Deborah Weinstein, executive director of the Coalition on Human Needs, points to Congress’s passage of the Budget Control Act of 2011, where, to reduce the deficit, legislators “set up caps and sequestration which led to reductions in domestic programs in the years since,” affecting, among others, housing, infrastructure, and child-care programs.

As for welfare programs today, Weinstein says, “We know that Congress wants to make those cuts, and they [can] use the threat of—the existence of—the deficit to force cuts more readily. … [Congress] will give people the impression that we’ll just have to do it because the deficit is so bad.”

While such welfare cuts aren’t completely certain, the specifics of the tax plan don’t shy away from stripping people of benefits, particularly their health care.

For one, the ballooned deficit may trigger automatic cuts to Medicare, to the tune of $25 billion.

And, a recently released report by the nonpartisan Congressional Budget Office shows that the proposed elimination of the penalties associated with the Affordable Care Act’s individual mandate, which requires all Americans to have health insurance or pay a fine, would result in serious pain for the poor.

Because healthier people would be expected to opt out of the market, premium prices would be driven up by 10 percent, and millions would lose coverage. Republicans have ignored this, stating that it’s up to the individual to decide whether to keep their insurance. “Did we take away their money? No. There’s not $1 taken away from them if they make that choice,” Republican Senator Mike Crapo of Idaho told The Washington Post. However, an inability to pay hundreds of dollars in premiums doesn’t really constitute a choice for many low- and middle-income families. By 2019, the CBO estimates that four million people will no longer have health insurance. In 2027, that number will have grown to 13 million.

Just before the Senate Finance Committee voted to pass its version of the tax plan, Democratic Senator Sherrod Brown of Ohio and Republican Senator Orrin Hatch of Utah traded barbs about whom the tax cuts were primarily geared toward. Brown said, “I think it would be nice, just tonight, before we go home, to just acknowledge, well, this tax cut really is not for the middle class, it’s for the rich.”

Hatch was incensed. “I come from the poor people,” he said. “This bullcrap that you guys throw out here really gets old after a while.”

Yet, the idea that “the Republicans want to transfer wealth from the rich to the poor” is only repeated over and over because it’s true. While Hatch did grow up in poverty, he was one of the few that was able to work himself out of it (50 years ago, when the prospect of paying for law school through janitorial work wasn’t laughable).

It’s not difficult to see how Hatch, now a millionaire, believes the idea that most rich people work harder than others, a belief embraced by 66 percent of Republicans.

And further, that it’s high time that poor people pay their fair share.


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