In previous posts we’ve talked about possibilities for bipartisan cooperation on the federal budget and the tax plan. There were obvious possibilities for that to happen. The biggest cuts after all are to the corporate income tax, and Obama already discussed his interest in that in the 2015 State of the Union. Other Democrats talked to Trump about bipartisan options prior to the announcement of the tax plan.
Why didn’t that happen? Let’s look at the primary provisions.
- The Corporate Tax Cut
First of all, as many have mentioned, the average effective corporate rate in the US is not 35% but more like 24%, which is not so far from the international average. Real tax reform would bring the effective and nominal rates in closer line with each other–with the advantage of removing artificial lobbyist-created inequities in the tax plan. That, with adjustments to assure parity with other countries, would not break the bank. It would help the country and could have bipartisan support.
We have instead chosen to close few loopholes, insist on a nominal 20% corporate tax rate, and incur a massive revenue shortfall. That choice gives us the deficit as well as the middle-class tax increases. The connection to jobs is weak at best, so most of this additional corporate saving going to investors. Since it isn’t a matter of competitive parity—why are we doing it?
- The Pass-Through tax cut
The stated target of this tax cut was small business, but in fact few small businesses would be helped. Further, as was recognized early, this tax cut opens opportunities for wealthy people to avoid personal tax rates. The current form of the tax cut has rules that attempt to limit that. However many loopholes remain, and the rules are strangely targeted. Manufacturing and real estate can benefit, but not services.
Since most of this money is going to people who can exploit the loopholes—not to the stated targets—why are we doing it?
- The Estate Tax cut
This is of course the most problematical of all. Only rich people with estates over $10 million are involved, and the benefit increases with wealth. It is worth emphasizing that we don’t just raise the tax-free limit, we completely abolish it and with no unpaid capital gains taxes on the heirs!
As to why we’re doing it, the explanation is the most transparent of self-serving nonsense—“making rich people richer is good for everyone”.
These tax cuts are not bipartisan, because their logic has nothing to do with the welfare of the country. Donors are complaining they haven’t gotten what they paid for, so it’s time to get the job done. Bipartisanship is not on the agenda. These tax cuts are delivered as ordered.
It is important to recognize that there is nothing mysterious about the small, ultra-rich donor community (with the Koch organization as primary mover channeling money from others) and also nothing ambiguous about their demands—both money and power. You might even argue—though it’s a stretch—that perhaps the stock market is rising not on business prospects, but on all that extra money the ultra-rich donors will have to invest somewhere!
And there’s another twist to this too. Trump and the Koch brothers have much the same motives, but Trump is the President after all. How can he get away with a tax program that has been precisely engineered for his own benefit?
Trump was born for this job. He actually believes that whatever is good for him personally is by definition the best possible thing for the country.
So we are left with a philosophical quandary. Is a crook who uses his office to pocket more than a billion dollars from the country excused if he is too self-intoxicated to realize what he’s doing?