Wealthy celebrate tax law anniversary while workers pick up the tab
It’s the Trump-GOP tax law’s first anniversary and the wealthy are celebrating like it was Christmas all year, which it basically was for them. Working families, on the other hand, are less festive this holiday season: they weren’t invited to the party but are expected to pay for it.
The so-called Tax Cuts and Jobs Act (TCJA) was signed into law by President Trump last Dec. 22. The plan was misleadingly sold as a boon to the middle class despite ample evidence that it really catered to the well-off and well-connected. After 12 months, it’s clear the warnings were right: the real winners are big corporations and the rich.
But working families haven’t just been left behind—they’ve been left holding the bag. Another falsehood asserted by the law’s backers was that the huge package of tax cuts would somehow pay for itself. But it’s not: just as you’d expect, cutting taxes has reduced revenue, which in turn has increased deficits. As a result, federal debt will balloon by nearly $2 trillion.
Even though working families got relatively little from the tax law, they’re the ones expected to pick up the tab. Conservative politicians have announced they plan to combat the deficits their wealthy tax cuts helped cause with funding cuts to Social Security, Medicare, Medicaid and other public services vital to the well-being of working Americans.
Another way workers are paying for the TCJA is through outsourcing encouraged by new corporate tax rules. American corporations are now effectively charged half the U.S. tax rate on foreign profits as on domestic ones. Another part of the law says the more factories corporations build overseas, the lower the taxes they pay on their foreign profits.
It’s a recipe for American layoffs, which is just what General Motors has done by outsourcing production of the Chevy Blazer to Mexico and laying off nearly 15,000 workers in North America.
The figures behind all this unfairness are striking. This year over a fifth (21 percent) of the tax cuts are going to the richest 1 percent, who on average are expected to get a tax cut of $50,000. By the time the TCJA is fully implemented nine years from now, the share going to the top 1 percent will jump to an eye-popping 83 percent.
The corporate tax rate was cut by two-fifths, falling from 35 percent to 21 percent. As a result, corporations have paid $92 billion less in taxes in 2018 than in 2017 — a drop of almost a third. The corporate tax cuts helped push up the deficit to nearly $780 billion while giving rocket fuel to corporate profits.
Another false promise of the TCJA’s supporters was that corporate tax cuts would filter through to working families via higher wages. President Trump specifically guaranteed them a $4,000 raise.
But that’s not happening: so far only 4 percent of employees have gotten any kind of pay bump tied to the tax law, according an Americans for Tax Fairness study. Nationwide, real hourly wages are up less than 1 percent over the past year.
Those tax-cut-boosted corporate profits are instead going in a more familiar direction: into the pockets of wealthy shareholders and powerful CEOs. Since the day their taxes were slashed by the GOP, corporations have announced more than $1 trillion in stock buybacks. Buybacks are a Wall Street strategy that inflates share prices, further enriching the already rich.
Prescription drug companies are spending about $65 billion on stock buybacks for CEOs and wealthy shareholders. Not a dime has gone to lower consumer drug prices.
One of the most disastrous effects of the Trump-GOP tax cuts is the potential gutting of the Affordable Care Act (ACA). The tax law zeroed out the ACA penalty requiring people who do not purchase private health insurance to pay a tax. Getting rid of this requirement saved $314 billion, which was used to help finance Trump’s corporate tax cuts.
Now, an activist GOP judge in Texas has seized on that provision to declare the entire ACA unconstitutional. If upheld, his decision will result in 17 million people losing private health insurance and Medicaid and eliminate protections for 130 million with pre-existing conditions.
The wealthy don’t need another reason to pop the champagne this New Year’s Eve over the TCJA: they started partying before the president’s signature was even dry. But for the rest of us, the first anniversary of the Trump-GOP tax law is a good time to start trying to repeal everything that’s wrong with it.
Frank Clemente is executive director of Americans for Tax Fairness.