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The Great Untaxed

The Republican tax bill is now kicking in—and the rich are making off like bandits

Like all austerity policies, the ultimate point of Trump’s new tax code is to come down hard on poor people while enriching the most comfortable. It squares perfectly with his administration’s approach to immigration, health care, and foreign relations, and we should treat it as an urgent threat.

This April 15 is the true start of another mass redistribution of wealth upwards, this one engineered by the Tax Cuts and Jobs Act of 2017. The effects are so large, James S. Henry, a senior advisor to the Tax Justice Network, told me in an interview last month, that the most appropriate analogue is the physical distribution of land rights to railroad barons two hundred years ago.

The act’s widely reported hallmark is to reduce the amount corporations must contribute to our collective pot by cutting the corporate income tax rate from 35 percent to 21 percent. That alone is bad enough.

Less frequently reported are all the other corporate goodies found in the five-hundred-plus pages of the act, which was rushed through the Republican-dominated Congress with no real debate or public hearings. There’s a provision that allows multinational corporations to continue hiding their collective $2.6 trillion in offshore accounts, as long as they pay a small “repatriation tax” divvied up into even smaller increments over eight years. There’s a 100 percent deduction for any corporate investments that fall in value. There’s a new 20 percent deduction for “pass-through businesses”—businesses that pay no corporate income tax—which, contrary to what Trump would have you believe, aren’t just small businesses, but also hedge funds, law firms, and massive corporations. Bechtel, the $25.9 billion corporation that led construction of the Hoover Dam and made a lot of money “reconstructing” Iraq, is a pass-through business. So are some of the companies in the Trump Organization.

Those corporate tax cuts are big wet kisses to the wealthiest class. The swells get more love as individuals, too. The top 1 percent earned an average tax cut that equalled 2.6 percent of their income last year, for example, about $48,320 per household, the Institute on Taxation and Economy Policy found. And now a married couple can leave their kids $22 million before the estate tax kicks in, double the previous amount.

What these tax cuts really do is give lawmakers another reason for not spending money on the most vulnerable.

Besides the overriding sense of how unfair it is for rich people to get such handouts, you may not immediately feel the effects of the Tax Cuts and Jobs Act. In fact, some low- and middle-income households may even see a little more money because of it, at first. Average households earning between $40,000 and $64,000, for example, could pay $810 less in taxes, according to the ITEP. The poorest households, on average, may see a savings of 0.9 percent of income—$120— about $2.31 per week. Of course, what that means for whether you owe money to the government or get a refund depends on each individual, and refunds in general are down this year, according to the IRS. But either way, those tiny benefits are set to expire in 2025. Most of the cuts for the top dogs are permanent.  

Where you’ll really feel it is in the years to come, when a bridge collapses beneath you during rush hour, or Congress slashes funding to Medicare and Medicaid or cancels food stamp programs, or generally guts spending on everything except the military, because they say they don’t have the money for it. That’s what these tax cuts really do: they give lawmakers a reason for not spending money on the most vulnerable.

Already Trump’s 2020 budget proposes spending cuts to Medicaid, Medicare, Social Security, Centers for Disease Control, and global AIDS prevention programs, among other things. “What we see now have been decades of cutbacks to welfare argued around the premise that we can’t afford these welfare programs because we don’t have the money for them,” John Christensen, director and chair of the Tax Justice Network, told me in an interview. “We’re going to see inequality in the U.S. rise significantly,” he said. “Welfare services, education services, public health services, have all been cut back. That’s the practical impact. These tax cuts serve no useful purpose. There’s no stimulus. But what it does do is feed into cutbacks to government programs for the elderly, sick, the people without jobs.”

The cuts will also come with a refusal to invest in our crumbling infrastructure—remember when that was on Republicans’ to-do list? “Life will be harder. It’ll be harder to get a job. It’ll be harder to feed your family,” Steve Wamhoff, director of federal tax policy at ITEP, told me. “It doesn’t make any sense. It’s purely ideological.” 

Some Republicans compared Trump’s tax to those enacted by Ronald Reagan in 1981 and again in 1986. They are especially fond of the latter, because it was a bipartisan bill. What they conveniently forget, though, was that those tax cuts were so deep and destructive that Congress raised them again after both, in 1982, 1983, 1984, and 1987.

George W. Bush also cut taxes in 2001 and 2003, and Barack Obama extended those cuts. But all of those were modest compared to the “civil war surgery” of Trump’s, Henry said.

Already Trump’s tax cuts have increased the federal budget deficit by $1.5 trillion, Henry estimated. By the end of 2025, the deficit caused by tax cuts will grow by $10.6 trillion, with nearly $2 trillion of that amount going to the richest 1 percent. With interest, the total impact on the deficit will be $13.6 trillion, the ITEP found.

It should surprise no one that not so long ago Trump promised not to cut Medicare, Medicaid, or Social Security, and then did just that. Perhaps it should likewise surprise no one that taxes do not seem to be a major concern of most 2020 Democratic presidential hopefuls, besides Elizabeth Warren, Bernie Sanders, and a few others, despite the fact that the majority of adults have for twenty-five years believed the upper class pays too little in taxes, according to Gallup research.

Reflect on corporations’ successful efforts to pay nothing in federal taxes, as was the case with Amazon in 2017 and 2018.

“They’re going to try very hard to fudge all of that, to not make it a major issue, to try in private meetings to suggest that if they roll back, it would only be a little bit, so they need not worry. Then they will leave it to the left wing of the Democratic Party, perhaps, to mobilize the citizenry, who have every right to be outraged for what was done in 2017, and who are already angry about these things,” Richard D. Wolff, visiting professor of economics at The New School and professor of economics emeritus at the University of Massachusetts, Amherst, told me recently. “Let Alexandria do her thing, let Bernie do his thing, then act out this good-cop-bad-cop scenario where the Pelosis and Harrisses wag their fingers at the Ocasio-Cortez- and Bernie- types and reinforce the idea that they’re the safe bet.” 

It doesn’t have to be that way. Democrats could take heart that Americans want to tax the rich. They could throw their weight behind the idea of a wealth tax, saying, for example, that applying it to billionaires would constitute a tax for just six hundred or so people, who are so wealthy they would still live lavishly afterwards.

They could characterize such an effort as conservative, as in, we’re trying to conserve the health and well-being of as many people as possible, instead of buying the spin that such a notion is radical.

“Democrats run scared when it comes to taxes and they’re always playing defense,” said Henry, who along with his work with the Tax Justice Network is also an economist, attorney, and a global justice fellow at Yale. “They think the game is to play defense and hold on to the status quo and they’ve been playing that losing game since Reagan and they haven’t developed a counter narrative that spending is important for the country to perform well,” Henry said.

As you file your taxes this year, reflect on what you get in return, not as a refund, but as services that safeguard your life. Reflect on corporations’ successful efforts to pay nothing in federal taxes, as was the case with Amazon in 2017 and 2018.  Reflect on the prevailing sentiment that billionaires will step in to provide services the government can’t or won’t, and contrast that with the fact that none of them have done so to, say, subsidize insulin for every American who needs it. Our tradition of taxation asks little of the wealthy and ensures their comfort and longevity. It asks too much of the rest of us and guarantees nothing, echoing the system of the thirteenth century, when the only people who paid taxes were the peasants. Socialism for the rich. Feudalism for us.