‘Tax reform’ is smoke-and-mirrors giveaway to rich

Bill Knight column for Monday, Tuesday or Wednesday, Sept. 11, 12 or 13

 “Tax reform” is often a phrase of smoke and mirrors, but never as thick or funhouse-crazy as President Trump’s proposal. The misleading label may appeal to our selfish motives. After all, don’t some people want to pay next to nothing while getting all of the government services they desire? Many would like to contribute zero but still get good roads, decent schools, Medicare, public safety at home and abroad, and disaster assistance.

Trump’s proposal – “Building A Better America: A Plan for Fiscal Responsibility” – would not build nor better the nation, and it isn’t fiscally responsible.

Thin on details, it starts by streamlining rates, from the current top personal rate of 43.4 percent to three rates: 10, 25 and 35 percent. The top corporate rate would fall to 15 percent from about 35 (which few pay because of deductions and loopholes). Some 70 percent of taxpayers may see cuts. However, the approach overall gives preference (and money) to the rich, not the middle class nor poor – an eerie, evil echo of the failed “trickle-down economics” theory, which has been shown not to spark economic growth but the accumulation of wealth by the already-wealthy.

“The plan would cut taxes at every income level, but high-income taxpayers would receive the biggest cuts, both in dollar terms and as a percentage of income,” according to the Tax Policy Center in Washington.

(The nonpartisan Congressional Research Service in a 2014 report said, “Historical data on labor participation rates and average hours worked compared to tax rates indicate little relationship with either top marginal rates or average marginal rates on labor income. A review of statistical evidence suggests that both labor supply and savings and investment are relatively insensitive to tax rates.”)

From an administration with so many Wall Street insiders, it’s no wonder that corporations and the 1% would reap the rewards of a tax overhaul being pushed on Capitol Hill. From Goldman Sachs alone, Trump’s team includes Treasury Secretary Steven Mnuchin and Director of National Economic Council Gary Cohn, Securities and Exchange Commission Chair (and one-time Goldman Sachs lawyer) Jay Clayton, Deputy National Security Adviser Dina Powell, and former Chief Strategist Steve Bannon.

Besides the plan’s basic unfairness, the proposal worsens the 36-year trend that’s seen the rich get richer and the rest get zip. That contributed to an income-inequality gap that dates to early in the Reagan administration, and the blueprint shows the GOP’s willingnesss to abandon its concern with deficits as long as their patrons benefit.

Indeed, conservative economist Robert J. Samuelson recently commented, “We cannot afford a net tax cut. Trump’s tax plan would add another $3.5 trillion of deficits over a decade. The costs would be transferred onto future generations.”

Economic Policy Institute analyst Hunter Blair said, “ ‘Tax reform’ will in the end likely just become a deficit-financed tax cut for the rich and corporations that expires in 10 years – a decade of free money for groups that don't really need it and a problem for policymakers to deal with in the future.”

The AFL-CIO issued a statement saying, “Republican leaders are set to pursue another massive transfer of wealth from workers to Wall Street. President Trump should drop his plan for corporate giveaways, make America’s tax system more progressive, and tax investors at the same rate as workers. Tax revenue should create good jobs and improve education and infrastructure, and meet the needs of America’s children, families, seniors and our communities. Taxes should shape an economy we want by targeting offshore profits and removing the incentives that push jobs overseas. And taxes should reward investment in domestic manufacturing, production and employment to encourage Made in America.”

The labor federation strongly suggests a more just plan:

* Big corporations and the wealthy must pay their fair share,

* Reform must raise significantly more revenue,

* Reform must eliminate the tax incentive for corporations to shift jobs and profits offshore, and

* Global corporations must pay what they owe on past profits held offshore.

Elsewhere, Citizens for Tax Justice recommends a simple approach to improving the tax system:, stating that “tax reform” should:

* raise revenue,

* avoid intensifying income inequality, and

* close corporate tax loopholes and ensure corporations pay their fair share.