As the TV blur of reruns of Trump repeatedly, monotonously and noisily promising tax cuts for the middle class play on, there is a feeling of disbelief at the crass duplicity of the Republican “Tax Reform” Bill. In a milieu where the disparity between the rich and the poor is scarily humongous this legislation will not only not help but will exacerbate the chasm as the prospective legislation favors the top one percent of Americans over the rest. Thrown into the travesty is the threat this Legislation poses to Obamacare specifically and Healthcare generally.
According to Ray Dalio, a hedge fund billionaire, in an expose entitled Principles, America faces its biggest haves versus have nots crisis in modern history. One tenth of a percent of the richest have more wealth than ninety percent of the population combined. Jeff Bezos, Warren Buffet and Bill Gates have more assets than forty percent of American population.
It seems that once again what stands between the quickening march into a mean spirited oligarchy is the thin red line of a few Republicans who for whatever reasons could call a halt to this madness. What might help their decision making is the finding of political scientist, Chris Warshaw of Washington State University, that the Tax Bill is the second most unpopular piece of major legislation mooted in the past thirty years - the first being the Republicans attempt to repeal and replace Obamacare, which ironically they have made a part of this legislation.
TAX “REFORM” OBJECTIVES
The Bill itself, which represents tax cuts rather than reform, any coherent policy or economic philosophy, is designed for two principle objectives. These are to allow Trump and the Republicans to pass one piece of major legislation this year and as payback to the rich Republican donors at the expense of the poor and middle class. In addition it is punitive towards the States that voted against Trump and its patchwork construction is designed to prevent three Republicans from voting against it. For example, Lisa Murkowski from Alaska who has grave misgivings about the removal of the Obamacare mandate in the Bill, has a sweetener in it that makes it hard for her to vote against. For whatever reasons it is a top priority of the State of Alaska to develop more oil fields in the Arctic National Wildlife Refuge which venture Obama nixed. The Bill provides the money for it.
WHAT’S IN TAX “REFORM”
The tax plans put out by the Republicans, aid and abet Trump in his destruction of every economic principle the GOP has stood for. The Bill will push up the deficit markedly. At present there is a struggle to keep its cost within a $1.5 trillion limit over ten years. Deficits, even a year ago, used to be considered blasphemy by the fiscal conservatives of the GOP. The bald face hypocrisy of the Republican legislators of both the Senate and House Bills is evident when it is recalled on this very issue they shut down Obama’s Government.
Although Trump Trumpets night and day about tax cuts for all in the bill, in reality they are hopelessly lopsided in favor of the rich and powerful. For example, if you earn less than $36,500 a year you could save twenty cents a day and if you earn over $5,000,000 your savings are about a thousand dollars a day. Those in the middle class are in a quandary as to whether they are or are not going to be better off. The Joint Committee on Taxation estimates that ninety - two percent of the taxpayers will be paying the same or slightly less initially. In years to come only forty percent will be benefiting and many will be paying more because their tax cuts will be programmed out. The very rich’s tax cuts remain forever. The reason for this curtailment on the poor and middle class majority is to cut down the projected deficit that this Legislation will wreak.
Besides the permanent personal tax breaks for the rich the estate tax will be done away with by 2024. At present the latter tax is on wealth above $5,500,000. As an interim measure it will be increased to $22,000,000 per couple. Overall the Office of the Tax Policy Center forecast that by 2027 half of the tax cuts will go to the top one percent of the population.
The Big Corporations benefit the most as taxes are decreased from thirty five percent to twenty percent. The indignation against this largesse stems from the fact they don’t pay thirty -five percent at present as there are several loopholes that they use. Not only are these escape clauses not being eradicated there are now even more deductions for the big businesses. Then the billions of corporate profits oversea can now be repatriated at the bargain basement price of twelve percent. The big let down is for small business, supposedly the raison d’être of the Republican Party's existence. There is a catchy stratagem called the “pass through” where the small business no longer has to pay the current thirty - five percent corporate tax but their profit can be “passed through” to the owner who has a maximum tax rate of twenty - five percent. This is a wash because that is the rate which apparently most of them are paying now.
The inescapable conclusion is that this is all about payback for the big donors of the GOP with the poor and the ill losing out. The exercise is also being utilized to decrease healthcare costs in an attempt to recoup some of the revenue lost on the one percenters’ tax deductions
TAX CUT CAN COST MILLIONS IN HEALTH CARE COVERAGE
The Tax “Reform” Bill contains the removal of compulsory registration under Obamacare. The non partisan Congressional Budget Office has calculated that this could save the treasury $338 billion over ten years. This “saved” money is as a result of the Administration not having to pay out subsidies to the approximately thirteen million Americans who might not sign on as they are younger and healthier. Removing this lower risk group from the pool will have the effect of insurance companies having to increase premiums for everyone.
Another cynical move for the “workers”, that Trump purports to represent, is the removal of the tax break from those who spend more than ten percent of their income on health care, The Congressional Research Office reports that six percent of taxpayers, earning between $20,000 and $50,000 claimed, about an $8,000 tax deduction in 2014. The Association of American Retired Persons in 2015 maintain that about half the people who claimed the deduction earned less than $50,000 and a similar amount were over sixty - five years of age. The belief is that without this help many will just forego health care. To rub salt into the wounds of the battlers, they will no longer be able to deduct the interest paid on College loans. Another craven penny pinching measure will eliminate the small deduction previosly given to teachers who purchased school material, with their own money, for impoverished pupils.
The New York Times points out a further threat to the funding of those who are ill. The basis for this peril being that legislation that produces large deficits triggers mandatory spending cuts all round. Medicare stands to lose $25 billion. Speaker Paul Ryan has made it quite clear that both Medicare and Medicaid may be cut to reduce the deficit.
REASONS FOR THE UNDERLYING MADNESS
So why this mean madness? Why would the Republicans, who are facing an electoral disaster risk a final nail in their coffins? Why would they defy the economic purists and flaunt their cardinal rule not to increase the deficit? Why would they want to recoup some of the money they are lavishing on the fat cats by, inter alia, no longer allowing deductions of State taxes which may well ensure the loss of the House? The answer is simple their big donors are demanding it. As the latter are the reason why there are large Republican majorities in the Federal and State legislatures they cannot be denied. This is the tiny constituency that they serve.
The benefactors that include the Koch Brothers, who poured nearly a billion dollars into the down ballot contests in 2016. The Koch group have a purist Libertarian outlook. They don’t believe in taxation or regulation - the free market unshackled. No “entitlement programs” either as, where necessary, private charities could provide assistance to those who legitimately need it.
There are those who purport to really believe in what is referred to as trickle down or supply side economics. One such pundit is Gary Cohn, Trump’s Director of the National Economic Council and his Chief Economic Advisor. Cohn addressing a packed hall of business leaders claimed that their tax break would lead to an increase in wages. A skeptical chairman of the meeting asked all those who would do so to raise their hands and only three tentative arms responded. Cohn incredulously exploded, “Why aren’t all the other hands up”? The POTUS could explain, as he did on the trail, when detailing why he paid as little tax as he could. He elucidated that he had a responsibility to his companies and his family. Well the Big Corporations have a similar commitment to their shareholders and themselves. They will either increase dividends and or buy back shares to push their share prices up.
AT THE END OF THE DAY
So the great communicator, who connected with the blue collar workers and the miners, has not opened the mines nor provided high paying manufacturing jobs. There has been no major infrastructure expenditure that might have helped their plight. As for his stance on trade, it has produced no positive results and all it has done has weakened America’s position in the world. Rather than, as he promised, penalize the companies who outsourced their production, he has given them tax breaks with nothing being offered in return. The non college educated voters of the rust belt are not interested whether Trump has a legislative win or not. Rather the despondent citizens are awaiting the Great America Trump promised them.
Already Republican suburbia has sent the President a message. It remains to be seen whether the blue collar workers who put him over the top in Ohio, Pennsylvania, Michigan and Wisconsin will join them.
As to the Bill’s ultimate fate it has a long way to go. The House and Senate versions are different. No one knows how the thin redline of Republican Senate doubters will finally react whatever they may say now. Once again the focus is on Senators Corker, Flake, Sasse, Murkowski, Collins, Johnson and McCain. Johnson has already stated he will vote against because big business rather than small business has got all the breaks. Trump has goaded Senator Flake, who has fiscal doubts, to vote against by sneeringly claiming that he will. Bob Corker has stated that he was anti any bill that increased the deficit by one cent. A doubting McCain has opined that tax cuts favoring the wealthy push the deficit up. Murskowski and Collins both are unhappy about the linking of healthcare cuts with the tax bill. The temptation to naysay the Bill by these seven has to be great, especially in view of the polls which show a wide margin against.
All this bizarre back and forth while the Mueller investigation grinds on. With each day the revelations put Trump and his team further in jeopardy. The implications of this probe make the POTUS’S problems about tax “Reform” pale into oblivion.
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