First, it’s a missed opportunity. Those who object to this plan — and telegraphing the hopeful part, that’s turned out to be the majority of us who (a) don’t answer to Republican political donors and (b) disbelieve in trickle-down fairy tales — still believe that a true tax reform plan would have been useful. Such a plan would have simplified the code, been at least deficit-neutral (though based on our aging demographics alone we’re going to need more, not less, revenue going forward) and been distributionally neutral as well, meaning it would not amplify our already high levels of pretax inequality.
This bill comes nowhere close to meeting any of those goals. By privileging certain types of income — passive investment income, corporate dividends, overseas profits, inherited wealth — it creates a huge incentive for anyone with a tax lawyer to classify their income as one of these types. That adds massive complexity to the code, while incentivizing people to unproductively spend time and money figuring out how to avoid paying taxes.
Because just about every legitimate, nonpartisan score of the plan showed it would raise the 10-year public debt, it is now widely recognized that the plan is deficit-financed to the tune of at least $1 trillion and maybe more.
By favoring the income types noted above, all of which are mostly held by the rich, the plan will increase the inequality of wealth, which has already doubled since 1980 (the top 1 percent’s share of U.S. wealth has grown from 20 to 40 percent since then). The structure of the bill clearly determines this outcome. Most of its individual cuts expire after 2025 to help fund its deep and permanent corporate cuts. Thus, by 2027, we’re left with the pattern of losses and gains shown below.
So, on three criteria for actual tax reform — simplicity, deficit neutrality and distributional fairness — the plan fails miserably.
My second reason for giant discomfort relates to the inequality problem just noted. That doubling of wealth inequality, along with a similar proportional increase for income concentration (since 1980, the income shares of the top 1 percent have gone from 10 to 20 percent), occurred before taxes kick in. That is, the market itself has been pushing up inequality. The last thing we need is for the tax code to exacerbate that problem. But that’s precisely what this bill does.
Why has market-driven inequality gone up so much? Basically, a bunch of developments that favor wealth and profitability over paychecks: sharply diminished union power, decline in wage standards (low federal minimum wages, weak workers protections), booming finance/weak manufacturing, trade deficits, high joblessness for non-college educated workers, “secular stagnation” (persistently weak aggregate demand), the increasing monopolistic concentration of certain sectors, and underinvestment in large swaths of kids, their families, their schools and their neighborhoods.
All stuff that this plan makes worse. Consider, for example, that last part about underinvestment. A clear, second-order effect of the deficit-financed cut will be — I should say: “already is” — an attack on the social insurance and anti-poverty programs that push back on inequality and engender upward mobility among those on the wrong side of the inequality divide. It’s not enough for today’s Republicans to enrich their donors at the expense of moderate and low-income families. They must then go after the safety net that’s expressly in place to catch those without the wealth portfolios of the tax writers and their rich clients.
My last reason for the big “arrggghhh!” is how hard it’s going to be to undo this damage. First, the overall U.S. economy (which is distinct from the very real plight of those still left behind) is doing well right now, cruising along on positive employment and earnings trends that have been ongoing for years, along with stronger growth in Europe and Asia. That means every positive, forthcoming data point will be accompanied by White House propaganda about how we’re seeing the magic of the tax plan unfold.
Second, it’s always harder to raise taxes than to cut them. Just ask President Barack Obama, who, after solidly winning a second term, was unable to legislate the sunsetting of the vast majority of the George W. Bush tax cuts.
As I write, congressional Republican majorities, as expected, are passing the plan. They are casting votes for inequality, fiscal recklessness, tax complexity and avoidance, and more offshoring of American investment and jobs.
And yet, not too far behind the scenes, there’s something hopeful going on, and that is this: the people are onto them. People know that you don’t really help them by giving corporations big tax breaks. They know the Republicans are doing their donors’ bidding, not their constituents’. They see through the Republicans’ ridiculously cynical pivot to once again worrying about the deficit, but only as a rationale to cut programs people value. They know about the Corker Kickback.
They — we — all sense that something terribly nonrepresentative is happening.
If that describes you as it does me, join me in being mad, frustrated and fundamentally, even existentially, pissed off. And then get ready to channel that energy into doing something about it.