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Imagine stand-up comic Henny Youngman, king of the one-liners, describing the Trump GOP tax proposals with one of his classic bits:
So how big is the tax break for the wealthy in the new tax bill?
Why it’s so big that raising the deficit by trillions of dollars won’t cover it…
Why it’s so big that raising taxes on the middle class won’t cover it…
Why it’s so big that gutting Medicare, Medicaid, the State Department and other government programs won’t cover it…
That’s right folks, the Republicans have hit the trifecta of inequality. Raising taxes on the middle class, increasing the deficit and gutting important programs that help every American so that the wealthy can get another tax break. Each represents a wealth exchange in which the ultra-rich get richer and someone else gets poorer. Any of these three wealth exchanges would in and of itself injure the economy while creating greater inequality of wealth. Making all three is likely to send the country into a deep recession or a real depression.
The Trump GOP plans are perfectly crafted to offend all democratic principles: The richer the person, the bigger the tax break. The larger the corporation, the bigger the tax break. The more someone’s wealth is in capital such as financial assets and real estate—as opposed to salary—the bigger the tax break.
The GOP says that when you lower taxes, rich folk and corporations invest in creating more jobs and in paying better salaries. That’s not what history says. History tells us that rich folk pocket the money and then invest it in the secondary stock market (meaning it doesn’t help the company whose stock you bought although it helps the senior executives with lots of stock options; the company only benefits from the initial sale of the stock); buy government bonds to fund the deficit that their tax break created; and dump it into other assets like fine art, yachts, apartments in Manhattan and beach front properties. Meanwhile, money will have been taken out of the economy, as all the spending done by laid off government workers, recipients of government aid and the middle class before tax hikes will be gone. Within a few years of passage of either the House or the Senate version of “The Great Heist of 2017,” a new asset bubble will form then burst after which the economy will go into a rapid tailspin. Just like 1929, 1987 and 2008.
The wealthy pay historically low rates on their income in the United States, even after two mild tax increases during the Obama years. In the 1950’s, when the economy mostly boomed and there was less inequality of wealth than at any other time in American history, rich folk paid 91% of incremental income in federal income tax. Remember that means that they only paid 91% on the income over a certain amount, maybe a million dollars, truly a lot of money in those days. With all progressive income tax systems, everyone pays the same amount within income levels. The top rate always applies only to income above that limit. Everyone pays the lowest rate on their income up to that limit.
Studies by Thomas Piketty and others have established that the economy actually grows when we raise taxes on the wealthy—that is, until we raise them too much and it begins really to cut into spending and investment in job growth. And what’s the point when raising taxes on high tax brackets begins to hurt the economy? Piketty computed it to be a taxation rate of 70%, or roughly twice what the current maximum tax on income is.
In other words, instead of decreasing taxes on the wealthy, Congress should be raising them—and then investing the money in the kind of things that we did with our tax money in the 1950’s and 1960’s: pure scientific research, infrastructure improvement (focusing more on mass transit and less on roads and airports this time), public school and university education, energy development (solar and wind instead of nuclear), healthcare and helping the disadvantaged.
Many of the Republicans know that, if passed, their tax bill will sink the economy and increase inequality of wealth in the United States. Most don’t care because they serve as mere factotums to the ultra-wealthy who finance their campaigns and provide them with cushy sinecures after they retire from elected office. Today Republican candidates and elected officials—and many Democrats, too–count dollars not votes and represent a narrow constituency consisting of a handful of selfish multi-billionaires.
Copyright 2017 Marc Jampole