CNBC reported that “corporate taxes collected for the October-December [2018] period have fallen 17 percent from a year earlier, while taxes collected from individuals have fallen about 4 percent.” Corporations used a significant slice of their tax benefits to buy back stock to reward stock owners, including executives. Benefits to the economy from corporate spending on equipment, R&D and employees appear to be fading. That data contradicts congressional Republican claims in 2017 that the tax cuts would be revenue-neutral, with the federal deficit projected to add about $1-2 trillion in 2018-2025.
On top of the 2017 tax cut law, the president wanted to go one step further to help redistribute additional wealth to the wealthy. The New York Times wrote in 2018: “The Trump administration is considering bypassing Congress to grant a $100 billion tax cut mainly to the wealthy, a legally tenuous maneuver that would cut capital gains taxation and fulfill a long-held ambition of many investors and conservatives.
Currently, capital gains taxes are determined by subtracting the original price of an asset from the price at which it was sold and taxing the difference, usually at 20 percent. If a high earner spent $100,000 on stock in 1980, then sold it for $1 million today, she would owe taxes on $900,000. But if her original purchase price was adjusted for inflation, it would be about $300,000, reducing her taxable “gain” to $700,000. That would save the investor $40,000.
Capital gains taxes are overwhelmingly paid by high earners, and they were untouched in the $1.5 trillion tax law that Mr. Trump signed last year. Independent analyses suggest that more than 97 percent of the benefits of indexing capital gains for inflation would go to the top 10 percent of income earners in America. Nearly two-thirds of the benefits would go to the super wealthy — the top 0.1 percent of American income earners.”
In essence, this tax cut would continue a long US trend of redistributing wealth to the wealthiest individuals and households. This redistribution policy using tax law has been a treasured conservative goal for decades. For context, this represents a snapshot of what Americans think wealth distribution should be compared to what it is based on a 2010 survey.
Some candid comments from politicians and bureaucrats:
1. “This is going to cost me a fortune, this thing, believe me. This is not good for me. . . . I think my accountants are going crazy right now. . . . . This is not good for me. Me, it’s not so — I have some very wealthy friends. Not so happy with me, but that’s OK. You know, I keep hearing Schumer: ‘This is for the wealthy.’ Well, if it is, my friends don’t know about it. . . . . It’s all right. Hey look, I’m president. I don’t care. I don’t care anymore.” -- President Trump, remarks on tax plan, St. Charles, Mo., Nov. 29, 2017
2. The tax cuts will lead to a spike in Americans’ insurance premiums. Repeal of the Affordable Care Act’s individual insurance mandate is a major driver behind coming premium hikes. -- Former Trump HHS Secretary Tom Price
3. “My donors are basically saying, ‘Get it done or don’t ever call me again.'” -- Rep. Chris Collins (R-NY)
4. “The financial contributions will stop” if the GOP failed to pass its tax cuts. -- Sen. Lindsey Graham (R-SC)
5. “Get Obamacare repealed and replaced, get tax reform passed. “Get it done and we’ll open it back up.”-- wealthy Texas GOP political donor Doug Deason referring to the “piggy bank” being closed for donors
6. “Fundamentally the bill has been mislabeled. From a truth in advertising standpoint, it would have been a lot simpler if we just acknowledged reality on this bill, which is it’s fundamentally a corporate tax reduction and restructuring bill, period.” -- Rep. Mark Sanford (R-SC)
7. The tax bill won't pay for itself as claimed. Instead, the tax cuts will boost national debt by nearly $2 trillion, despite long-standing republican rhetoric that tax cuts pay for themselves by generating higher economic growth. Mulvaney acknowledged to Congress this year that the administration’s lowered its revenue projections by $1.8 trillion over the next ten years due solely to the effects of the tax cut. -- Trump budget director Mick Mulvaney
8. The tax bill is an attack on blue states that didn’t vote for the president. “They go after state and local taxes, which weakens public employee unions. And getting rid of the mandate is to eventually dismantle Obamacare.” -- Trump economic adviser Stephen Moore
9. “The most excited group out there are big CEOs, about our tax plan.” -- Trump National Economic Director Gary Cohn
10. The tax bill incentivises companies to keep some jobs overseas. “With a territorial system, there will be a real incentive to keep manufacturing overseas.” -- Sen. Ron Johnson (R-WI)
11. “If it ends up costing what has been laid out here, it could well be one of the worst votes I’ve made. I hope that is not the case, I hope there’s other data to assist, whether it’s jobs or growth or whatever.” ..... “None of us have covered ourselves in glory. This congress and this administration will likely go down as one of the most fiscally irresponsible administrations and congresses we’ve had.” -- Sen. Bob Corker (R-TN)
12. Trump speaking a few hours after he signed the bill into law to happy patrons at Mar-a-Lago “You all just got a lot richer.”
13. The average American family would get a $4,000 to $9,000 raise under President Trump's tax plan. -- Trump White House advocating for passage of the tax bill
14. The corporate tax cut isn’t “trickling down” to workers. “There is still a lot of thinking on the right that if big corporations are happy, they’re going to take the money they’re saving and reinvest it in American workers. In fact, they bought back shares, gave out a few bonuses; there’s no evidence whatsoever that the money’s been massively poured back into the American worker.” -- Sen. Marco Rubio (R-FL)
Sources:
1. https://thehill.com/policy/finance/382663-corker-tax-cuts-could-be-one-of-worst-votes-ive-made
2.https://www.theguardian.com/us-news/2017/jun/26/koch-network-piggy-banks-closed-republicans-healthcare-tax-reform
3. https://newschannel9.com/news/connect-to-congress/sen-corker-calls-congress-trump-administration-one-of-the-most-fiscally-irresponsible
4. https://www.alternet.org/news-amp-politics/here-are-6-times-republicans-told-truth-about-their-disastrous-tax-cuts
5. https://www.washingtonpost.com/news/wonk/wp/2017/10/16/the-average-american-family-will-get-4000-from-tax-cuts-trump-team-claims/
6. https://www.nytimes.com/2017/11/29/us/politics/a-main-street-tax-speech-becomes-a-trump-riff-on-the-rich.html
The moral landscape: One can argue that in a liberal democracy, a political moral imperative is to at least consider public opinion. The tax situation mostly ignores public opinion, offering only a fig leaf, but is highly responsive to and rewarding of special interest demands for more money (the data below is from a 2010 survey).
So far, the federal debt has increased contrary to what the public was told, with net wealth redistribution going to to top. In a 2018 article entitled Trump’s Tax Cut Was Supposed to Change Corporate Behavior. Here’s What Happened., the New York Times wrote: “Skeptics said that the money companies saved through tax cuts would merely increase corporate profits, rather than trickling down to workers.”
Trickle down economic theory was originally called the Horse & Sparrow theory. In an earlier, more honest period, Horse & Sparrow was used to describe the idea as feeding a horse enough oats so that some pass through and fall on the road for sparrows to pick thought the packaging before eating. We all know who the horses and sparrows are: Very few horses and very many sparrows.
Despite the foregoing moral morass, republican politicians sometimes still claim the moral high ground:
It is a matter of differing worlds views. For example, congressional republicans do not see the president profiting from his properties as anything to be concerned about in terms of corruption, actual conflict of interest, or violations of any law. By contrast many sources, and at least some conservative sources believed that the charitable foundation that Hillary Clinton and her husband controlled constituted serious perceived or actual conflicts. By comparison with the Clinton Foundation, which made its finances public, the properties that the president owns and still operates represent perceived or actual conflicts that are probably 10- to 100-fold more serious because the money flowing through them and the opacity of their operations are probably 10- to 100-fold greater.
B&B orig: 7/31/18, 5/5/18
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