This Tax Plan Puts Another Knife Into American Democracy

Deep down, investors know that when patriots put country ahead of self, everyone benefits.

Less than a decade ago, after years of dramatic deregulation coupled with revenue-draining tax cuts, the entire U.S. financial system effectively collapsed. It took down with it millions of American consumers, workers, small businesses, retirees and middle-class homeowners.

The country can’t afford this kind of outcome again. That’s why I want to be as straight as possible: Despite what you may believe, the Republican tax plan taking shape is a sham. It will lead to more pain and less prosperity for the vast majority of Americans.

.. Stopping it will be good for investors’ bank accounts, because when Main Street and the rest of the nation does well, so does the financial sector. Trickle-down economics doesn’t work, but trickle-up does. Trying to re-enact Reaganomics under completely different circumstances may well lead the economy back into a recession—one that the country will be ill-equipped to weather after the GOP proposal adds $1 trillion to the national debt.

.. The plan’s massive tax cuts won’t reinvigorate the economy. For years corporations have enjoyed historically high profits, but investment hasn’t increased alongside them. Last month at a meeting of The Wall Street Journal’s CEO Council, an editor asked attendees whether they would boost investment if the tax bill passed. Few hands went up.

..  Sixty-two percent of the benefits from the Senate bill’s tax cuts flow to the top 1% of earners

.. Honest analyses indicate that the Republican proposal overwhelmingly helps the wealthy and is probably a net negative for almost everyone else. That’s largely because it will be paid for with money taken out of the pockets of working Americans and their children: The tax cuts will be used as an excuse to further gut investments in education, health care and training. Slashing these services for working Americans will stunt the country’s future prosperity and weaken the overall economy.

..  the American people will not be fooled by the noise. If they see a bill passed that hands out filet mignon to the wealthy while leaving them struggling over scraps, they will be furious. Once again, they’ll realize that the system serves the needs of those at the top and ignores working families. They’ll consider this more evidence of corruption. And it will be harder than ever to argue otherwise.

.. Passing this tax plan, which adds to workers’ pain, would put another knife into American democracy. It would be a true disaster.

.. When 1 in 3 Americans say they are still struggling to recover from the Great Recession, is it

  • worth saving the Trump family $1 billion by repealing the estate tax?
  • Worth increasing insurance premiums for middle-class families in the individual market by $2,000, as the Center for American Progress estimates the Senate bill would?
  • Worth taxing tuition waivers, making it prohibitively expensive for young people to get advanced degrees and thus sacrificing America’s economic competitiveness down the road?
  • Worth cutting Medicare by $25 billion?
  • Worth ending tax credits for clean energy, sabotaging one of the most promising industries for the 21st century, while protecting much larger tax breaks for oil and gas?

Republicans Are Coming for Your Benefits

Republicans don’t care about budget deficits, and never did. They only pretend to care about deficits when one of two things is true: a Democrat is in the White House, and deficit rhetoric can be used to block his agenda, or they see an opportunity to slash social programs that help needy Americans, and can invoke deficits as an excuse. All of this has been obvious for years to anyone paying attention.

.. And it was also predictable that they would return to deficit posturing as soon as the deed was done, citing the red ink they themselves produced as a reason to cut social spending.

.. Hatch declared his support for the program, but insisted that “the reason CHIP’s having trouble is because we don’t have money anymore” — just before voting for a trillion-and-a-half-dollar tax cut that will deliver the bulk of its benefits to the richest few percent of the population.

He then went on to say, “I have a rough time wanting to spend billions and billions and trillions of dollars to help people who won’t help themselves, won’t lift a finger and expect the federal government to do everything.”

.. The House version of the big tax cut would eliminate the estate tax entirely; the Senate version would double the level of wealth exempted from the tax, to $22.4 million for a couple. How can this be justified if it’s supposedly hard to find money for children’s health care?

.. The important thing to realize, however, is that the hypocrisy and contempt for the public we’ve seen in the past few days is just the beginning.

.. offsetting those deficits will require going after the true big-ticket programs, namely Medicare and Social Security.

.. Republicans have given their donors what they wanted — and now they’re coming for your benefits.

Inheritance Tax: A hated tax but a fair one

surveys suggest that opposition to inheritance and estate taxes (one levied on heirs and the other on legacies) is even stronger among the poor than the rich.

.. Yet this trend towards trifling or zero estate taxes ought to give pause. Such levies pit two vital liberal principles against each other. One is that governments should leave people to dispose of their wealth as they see fit. The other is that a permanent, hereditary elite makes a society unhealthy and unfair. How to choose between them?

.. The positive argument for steep inheritance taxes is that they promote fairness and equality. Heirs have rarely done anything to deserve the money that comes their way. Liberals, from John Stuart Mill to Theodore Roosevelt, thought that needed correcting.

.. Annual flows of inheritance in France have tripled as a proportion of GDP since the 1950s. Half of Europe’s billionaires have inherited their wealth, and their number seems to be rising.

.. However, in 2017, it is not clear exactly how decisive a role inheritance plays in the entrenchment of the hereditary elite. Data from Britain suggest that people tend not to lose their parents before they reach the age of 50. In rich countries the advantages that wealthy parents pass to their offspring begin with the sorting mechanism of marriage, in which elites increasingly pair up with elites (see /react-text article react-text: 2518 ). They continue with the benefits of education, social capital and lavish gifts, not in the deeds to the ancestral pile.

.. The trusts they create as a result can last even longer than the three generations

.. If avoiding double taxation were a requirement of good policy, then governments would need to abolish sales taxes, which are paid out of taxed income.

.. However disliked they are, they are some of the least distorting. Unlike income taxes, they do not destroy the incentive to work—whereas research suggests that a single person who inherits an amount above $150,000 is four times more likely to leave the labour force than one who inherits less than $25,000.

 

Trump and Ryan Versus the Little People

First is the poster child family Paul Ryan keeps talking about, a family with two children making $59,000 a year. In the first year of the Cut Cut Cut Act, such a family would indeed receive a tax cut. But this cut comes from several special tax credits that are basically loss leaders to help sell the plan; they all either expire in later years or will get eroded by inflation. By 2027, with the plan fully phased in, that exemplary family would actually be facing a significant tax increase relative to current law.

 .. it’s not just Wall Street stiffs who would find themselves in that situation: So would doctors, lawyers, engineers, and other well-paid professionals. Overall, the Tax Policy Center estimates that more than a quarter of the population would see taxes go up, not down, under the G.O.P. proposal; for those with incomes between $200,000 and $500,000, that fraction rises to more than 40 percent.
.. Finally, let’s imagine a very lucky individual — let’s arbitrarily call him Eric Trump — who stands to inherit a stake in a business he doesn’t run, plus a bunch of stock. He’ll get his inheritance tax-free, because the estate tax gets phased out in the G.O.P. bill. He’ll get to pay a low tax rate on his business income. And his stocks will pay higher dividends, because the G.O.P. bill also sharply cuts corporate tax rates, and most of the benefit of those cuts will probably flow to shareholders.
.. So when Gary Cohn, Trump’s top economic adviser, says that the bill’s goalis “to deliver middle-class tax cuts to the hard-working families in this country,” he’s claiming that up is down and black is white. This bill does little or nothing for the middle class, and even among the affluent it’s biased against those who work hard in favor of the idle rich.
.. You might wonder how Republicans imagine that they can get away with this. But anyone who has paid attention to U.S. politics knows the answer.
  1. First, they will lie, unashamedly, about what their bill actually does.
  2. Second, they will try to distract working-class voters by stoking racial animosity.

Mnuchin Says Estate Tax Repeal Will Help ‘Rich People’ Most

Mr. Mnuchin said the estate tax should be eliminated for both philosophical and economic reasons. He said that many taxpayers give the government half their income during their lives and that they should not have to give away a big chunk when they die — even if their families are wealthy.

“Obviously, the estate tax, I will concede, disproportionately helps rich people,”

Mr. Mnuchin’s comments contrasted starkly with his boss, President Trump, who pilloried the estate tax in a speech in Indiana last month by saying it is a drag on the working class.

“To protect millions of small businesses and the American farmer, we are finally ending the crushing, the horrible, the unfair estate tax, or as it is often referred to, the death tax,” Mr. Trump said.

.. Couples can leave their heirs as much as $11 million, none of it taxed, meaning only a few thousand wealthy estates are subject to the tax a year.

..  Just 80 small farms and closely held businesses are expected to pay an estate tax in 2017, the center, a right-leaning think tank, projected.

Steve Mnuchin: We’re not cutting taxes for rich people. Bernie Sanders: Yes, you are.

The richest 1 percent — households making at least $732,800 — would get an average tax cut of $129,030, the analysis finds. For the typical one-percenter (who earns much more than $732,800), that means 8.5 percent more income after taxes. The richest 0.1 percent, earning at least $3.4 million a year, would get $722,510 back on average, for a 10.2 percent average boost in after-tax income.

By contrast, the middle class (households earning $48,600 to $86,100 a year) would get $660 back, a 1.2 percent income boost. The poorest fifth of Americans, earning $25,000 or less, would only get $60, a 0.5 percent increase.

.. But the next guest on the “This Week” was Vermont Sen. Bernie Sanders, who delivered a stinging rebuttal:

Everything he [Mnuchin] said is dead wrong … They are repealing the Estate Tax. The Estate tax only applies to the top two tenths of one percent — millionaires and billionaires, like the Walton family of Wal Mart, like the Koch Brothers, like the Trump family. $269 billion in tax breaks for the top two tenths of one percent over the next ten years. And this is not a tax break for the rich? Well, I don’t know what a tax break for the rich is.

The Trump Fog Machine

The Trump Fog Machine erased all his Tweets supporting the other guy in Alabama. No need for that. We do it for him, by following the fresh distractions. Trump is not Teflon. Things do stick to him. But he survives by saying or doing something so outrageous, so regularly, that we forget the last atrocity, and turn on one another.

.. So, this week his cabinet official charged with taking away health care from the poor and cutting the budget for cancer research is using our money to fly private planes at his pleasure. The multimillionaire treasury secretary wanted the same perk for his honeymoon.

.. He’s already tweeted the word “loser” 234 times, “incompetent” 92 times and “pathetic” 72 times. Call them projection tweets, showing the man for what he truly is.

..  He’s already lied about whether his tax plan will benefit the rich and his own family. It will, by eliminating the estate tax, and ensuring that the top 1 percent will get nearly 50 percent of the windfall.