Here’s a bit of advice for all the corporate executives, business owners, private-equity fund managers, real estate developers, high-salaried professionals and other wealthy individuals who, in a very literal sense, just bought themselves a big tax cut:
You might not want to make any long-term plans based on those tax cuts because they are likely to be temporary.
Yes, I know the legislation that emerged last week from the House-Senate conference committee says most of the provisions you lobbied so hard for are permanent (unlike those for the rest of us). The problem is that, because of those provisions, the tax bill was made so noxious to any notion of fairness or good fiscal policy that you have handed Democrats the perfect issue with which to recapture the House and Senate in 2018, and the White House two years later. You can be sure that the first item of business for the new Congress will not only be to repeal and replace your provisions, but to seek to recoup the tax cuts you will have already received.
You’ll have no one to blame but yourselves. You could have won almost all of what you once said you needed and wanted from tax reform without this sort of political backlash. But after Republicans ran the table in the 2016 election, you got piggy. Instead of insisting on a fair, fiscally responsible and well-crafted tax bill passed with input and support of some Democrats, you dropped any pretext to bipartisanship, to acting as stewards of the economy, and just started looting the U.S. Treasury of everything you could grab.
Don’t think for a minute that the public didn’t notice. And don’t kid yourself into thinking this is just a passing issue. Every Democrat in every state and congressional district will now use every speech, every TV ad and every tweet to rile up populist anger at your plutocratic vision of American capitalism. You just did the impossible – you unified the Democratic Party!
You’ve also just created prize-winning opportunities for every business reporter and news editor in America. Now, every time any major company increases its dividend, or announces a stock buyback, or ships a single job overseas, it is going to be a front-page story about what a con job the Republican tax bill really was. There will also be special opportunities for investigative journalists who uncover the most egregious examples of the ways superstar athletes, lawyers and entertainers find to turn themselves into “limited liability corporations” and avoid paying their fair share of taxes. In a year or two, policy blogs will buzz with the latest from academic economists just itching to demonstrate how little impact the tax bill has had on jobs, wages and business investment.
You might also look ahead to what will happen when you show up with your lobbyist and your campaign contribution at the offices of Democratic congressmen and senators who will make up the new congressional majority, hoping to explain why repealing the Republican Tax Giveaway will be bad for the economy. You can’t imagine — or maybe you can — the sweet revenge that even moderate, pro-business Democrats will feel as they slam the door in your face. To find the last time the business community had so little cred with Democratic politicians, you’d have to go back to 1932.
As Warren Buffett might have put it, there is now a full-blown class war in America, and you are the ones who started it. Your intellectual dishonesty, your swampy behavior, your unabashed greed have now created an army of political enemies who are so outraged they won’t settle for anything but unconditional surrender. Those people marching with pitchforks toward the polls next November won’t be just hippies and political partisans. They will be your customers, your employees and your grandchildren.
What might surrender look like? You won’t have to hire any of those high-priced lobbyists to find out. Here’s the section-by-section summary:
The Tax Fairness and Economic Justice Act of 2019
Section 1: Imposes a “Freeloader Tax” on all individuals who fail to purchase health insurance, set annually by the Centers for Medicare and Medicaid Services to recoup, retrospectively, every dollar that hospitals and other providers have offered in free care to those without public or private insurance.
Section 2: Increases the top corporate income tax rate on U.S. income to 26 percent. To limit the effect of loopholes, adds a minimum 12 percent tax rate on U.S. income. To limit use of foreign tax havens, adds a minimum 12 percent rate on foreign income, net of foreign taxes paid. Bans transfer of intellectual property rights to foreign subsidiaries.
Section 3: Eliminates business tax deduction for interest payments.
Section 4: Increases the top individual income tax rate to 40 percent, which would automatically increase 1 percentage point for every 1 percentage point increase in the share of national income going to the households in the top 1 percent.
Section 5: Caps at $50,000 all personal income tax deductions other than medical expenses, losses from natural disasters and donations to nonprofit organizations whose primary activity is to help the poor and the disabled.
Section 6: Repeals the deduction on income from business “pass-throughs” not subject to the corporate profits tax. Also adds a provision dramatically reducing the number of pass-throughs by subjecting any business with more than $5 million in revenue to the corporate income tax.
Section 7: Requires estates to pay the capital tax on any unrealized gains before any proceeds are distributed to heirs. Also adds a provision subjecting bequests to individuals of more than $1 million to the income tax at capital gains rates.
Section 8: Collapses the current seven income tax brackets into three, as long promised but never delivered by Republican politicians. Also makes permanent the higher standard deduction and child credit, while making the child credit fully refundable to families with little or no income tax liability.
Section 9: Directs the departments of Agriculture and Interior to calculate the full economic value of any subsidies provided to any farmer, rancher or energy company directly or as part of a sweetheart contract or royalty agreement, and subjects such subsidies to the personal and corporate income tax.
Section 10: Imposes a tax on sale of all stocks, bonds, derivatives and other securities and financial instruments of 0.5 percent. Also repeals the carried interest provision enjoyed by managers of private equity and investment funds.
Section 11: Ends favorable tax treatment of like-kind exchanges of real property, widely used by real estate developers. Also prevents owners of real estate from depreciating assets that are, in fact, appreciating in value.
Section 12: Prohibits corporations from deducting the cost of performance bonuses and stock and stock options for top executives unless an equal amount of money has been set aside in a profit-sharing plan for front-line employees.
Section 13: Imposes a carbon tax on companies involved in the sale of oil, gas and coal, pegged to the social cost of carbon as determined by the National Academies, with proceeds to be used for rebates to low-income consumers, tax subsidies for production and use of clean fuels, and for mitigation efforts to protect against the negative effects of global warming.
Section 14: Quadruples the enforcement budget of the Internal Revenue Service and establishes bounty rewards for anyone who reports tax fraud of more than $1 million who is successfully prosecuted.
But, hey, have yourself a merry little Christmas. It may be your last one for a while.