Let’s start with the big picture. House Republican leaders just put out their tax plan—after, of course, negotiating only with other Republicans on its provisions. The plan distills Republican economic philosophy perfectly: take lots of money and give it to the people at the top while pretending that doing so will help everyone else.
This claim derives from a fallacy known as trickle-down economics, one that data has proven to be as false as Jeff Sessions’ statement that he knew nothing (nothing, I tell you!) about Trump campaign officials having contact with the Russians. Just ask one of the architects of Ronald Reagan’s tax cuts, who pointed out that the 1990s—which included tax hikes on the rich passed in 1990 and 1993—had stronger growth than the 1980s and the 2000s, each of which began with big tax cuts for the rich.
On trickle down, the International Monetary Fund—not exactly a bunch of socialists—found in 2015 that increasing income at the top end reduces overall economic growth, while increasing income for those nearer the bottom improves a country’s overall economy. They even quantified the effect: a 1 percent increase in income for those in the top 20 percent leads to an economic shrinkage of 0.1 percent over a period of five years. On the other hand, when those in the bottom 20 percent experience a 1 percent growth in their income, overall economic growth is 0.4 percent higher over five years. Did House Republicans act on this knowledge and produce a plan that will increase growth? Of course not. Their plan does the opposite.
House Speaker Paul Ryan, at a press conference where he rolled out the plan, was asked a pretty good question about the supposed benefits of trickle-down tax cuts for the rich:
The Bush tax cuts did not result in growth or higher wages or more jobs. Why are you certain that this will be different?
The Republican answer was essentially a word salad built around the notion that “simplicity, fairness, and competitiveness” would do the trick. The biggest difference, however, between this Trump-Ryan tax cut and the George W. Bush tax cuts is that this one will actually raise taxes on plenty of middle-class families and households, in particularly cruel ways.
The House plan is quite detailed, so let’s focus on a few of the measures that are particularly stomach-turning, all of which raise taxes almost exclusively on those near or below the middle. First, if Republicans want to make it easier for Americans to pay for college, they sure could’ve fooled me. They’ve proposed to end the ability to deduct interest on student loans—a deduction claimed by about 12 million Americans in 2015. Democrats, on the other hand, want to help people deal with student loan debt and the cost of college.
Additionally, the House plan eliminates the ability to spend pre-tax dollars on child and dependent care—a crucial benefit that in particular helps families where both adults work. The Trump-Ryan plan also gets rid of the deduction for excessive medical costs, i.e., costs that go above 10 percent of a household’s gross adjusted income in a given year.
What else? The plan removes the deduction for adoption-related expenses. Why? Well, President Obama is the one who signed legislation making it permanent, so that’s probably enough for Trump to want to throw it out. This Republican provision will make it far more difficult for families who aren’t rich to adopt a child. So much for family values.
There’s a lot more in this plan to make you sick, but now let’s return to the overall effects. This billionaire’s bonanza is estimated to add $1.5 trillion to the federal deficit over a decade, and that’s “before accounting for interest or possible gimmicks,” according to the bipartisan Committee for a Responsible Federal Budget.
Of that $1.5 trillion, $1 trillion results from corporate tax cuts, and another $200 billion results from the elimination of the estate tax—a tax paid only by estates at the tippity-top, i.e., 1 out of every 500 of them, or 0.2 percent. The benefits of the corporate tax cuts will not go to employees—that’s the trickle-down fantasy—but instead will flow to shareholders, who are overwhelmingly wealthy and of whom 35 percent are foreign. How in the world will that make America great again?
The money is being taken from middle-class families and sent up the economic chain—not to mention overseas—and it won’t come trickling back down. Separate from changes to the tax code, we know that Republicans will look to gut the safety net that protects the elderly and the vulnerable—which could be any of us—in order to pay for this immoral plan. How do we know? That’s exactly what happened in Kansas—where a similar plan essentially bankrupted the state government and resulted in a weaker economy than neighboring states who didn’t follow their scheme. California, on the other hand, raised taxes on the wealthy and has seen far stronger growth than the national average.
The way to stop this rich man’s tax cut is to make the phones ring off the hook in the offices of gettable Republican senators and House members. If you want to resist Donald Trump, then for the next number of weeks this issue is the most effective way to do it.