30
Nov
17

GOP Tax Bill – Trumped Up Trickle-down Tax Plan

The GOP Tax Bill – The Trumped Up Trickle-down Tax Plan

What could be easier than passing a bill that cuts taxes on US citizens? It should be easier than falling down. I mean who doesn’t want to pay less on their taxes? But this is not what the GOP tax bill is. First and foremost, the tax cut is for the benefit of the sponsors of the Grand Old Party. It starts with the permanent tax cuts to large corporations. Next, you add other goodies, like getting rid of the Alternate Minimum Tax (which makes some very rich people pay at least some income tax), getting rid of the Estate Tax (House Plan and the Pass Through Tax Reduction for the wealthy. From these cornerstone, all other legislation follows. To get at least some support for their plan, the GOP feigned that they were going to cut taxes on the middle class. And, in order not to blow a giant blackhole in the Federal budget, the GOP has taken away tax deductions used by the middle class.

How popular is this Tax Plan?

The GOP Tax Plan is extremely unpopular, only 25% approve and 52% disapprove – see Axios Link. But The GOP wants to pass it anyway.

Why The GOP Tax Bill is Bad For America?

1. Tax Cuts To The Corporations Do Not Increase American Jobs or Increase Wages.

a) Trickle-down theory is a farce

The GOP Tax Plan is a re-hash of trickle-down economics, sometimes called Voodoo economics. The outrageous theory is that if you give money to the rich, it will trickle-down to the middle class. We have overwhelming evidence that it has never worked. The Reagan tax cuts, the first recent trickle-down tax cut, not only did not create more jobs, but it was the start of the widening economic disparity that has continued to widen. Even, more recently  the experience of the Republican-dominant state of Kansas has shown to nearly bankrupt the state.

b) The Real corporate tax rate is 15%, With the Corporate Tax decrease the real rate will be 8.5%

Corporations are making all time profits, capital can be borrowed at incredibly low rates and yet these corporations don’t hire any new employees or pay them more. There has been a change in the thinking of corporations. In the 1960’s, Corporations made up 21% of the total federal revenue. Now, in 2016 Corporations pay only 9% of the total federal revenue (CPPD), which means the bigger share comes from the middle class. And, now, the GOP wants to decrease the corporation tax rate from 35% to 20%!!! Not that Corporations pay 35% income tax, after all their lobby-filled special tax exemptions, corporations pay only 15% on income (Forbes) – and if you decrease the nominal rate from 35% to 20% without getting rid of these exemptions, the real corporation tax rate would be 8.5%. So, what would be the percentage of corporation revenue to Federal Revenue after this GOP tax cut? It would decrease the revenue towards to the Federal government from an already all time low of 9% to an obscene rate of 5%. Together, with the elimination of the estate tax, this means that the middle class will have to pitch in even more.

c) Why Don’t Corporations hire more or pay more with record breaking profits?

Corporations have had a change in philosophy/conscious. Since the 1970s, corporations’ goal has been to maximize profit while enriching their CEOs and shareholders. It used to be that a corporation would only “down-size” (resorting to mass firings) when the corporation profits were negative. Then, in the 1980s, corporations started downsizing when profits were static and, now, corporations routinely downsize even when they are pulling down record profits. So, what do corporations do with these record profits if they are not creating more jobs or paying higher wages? First, pay CEOs more: CEOs pay has been skyrocketing every year. The ratio of CEO pay to workers is 335 to 1. It used to be 17/1 in 1980. The second thing corporations do is pay more dividends to stockholders. The third thing corporations do with their record profits is they buy back their own stock to pump up their price in the stock market. (This practice should be illegal). Fourth, corporations, thanks to the Republican-dominant Supreme Court created the Citizens United Decision which allows corporations to contribute unlimited money into campaigns, which sends tons of money to their minions, so, the GOP can pass laws like the Trumped Up Trickle-down Tax Plan. The circle of greed continues.

2. Why is only One Party Doing this Tax Plan?

Like the unsuccessful repeal of the Affordable Care Act, The Republicans have been plotting in secret to pass the Trumped-Up, Trickle-down Plan through a process called Reconciliation. By using Reconciliation, only a simple majority is needed, the issue must be budgetary and would not increase significantly the federal deficit beyond a 10 year term limit. So, how does a plan that increases the federal deficit by $1.4 – 1.7 trillion fit that definition? I do not think it does. And because the GOP has majorities in the Senate, The House as well as The President, the  Republicans feel that they can do whatever their sponsors want. And despite what the public wants (52% disapprove), The GOP might just pass this pile of steaming garbage.

3. Who Profits of this Tax Plan?

Who are the winners of this plan(Wash. Post)? 62% of the money from this Republican Tax Plan goes to the top 1%. Obviously, corporations are the biggest winners. People making at least $200,000 and up are also winners – they will be rid of the Alternate Minimum Tax (Donald Trump would have gained $31 million in his 2005 Tax return). The House Tax Plan eliminates the Estate Tax, but today’s Senate Plan increases the the exemption to 11 million for a couple. In another give-away to the wealthy is a reduction in the tax rate who use a process called “Pass Through”. This is where a wealthy person who has a sole proprietorship or limited corporation income from their business transfers into their personal income at a rate of 25% instead of 39.5%.

4. Who Are The Losers of the Trumped-Up, Trickledown Tax Plan?

The GOP Tax plan is very tricky. Things like the repeal of the Estate Tax and decrease of Corporate tax are gradually phased in and are permanent, while the tax breaks to the middle class are gradually phased out and are temporary, which means that the middle class will pay more by 2027.

The Losers:

  1. Families with three or more children
  2. People that deduct state and local taxes from their federal taxes.
  3. Working poor.
  4. College students
  5. Small Businesses
  6. People who pay for Health insurance
  7. People who deduct home mortgage
  8. People Who adopt
  9. People who deduct medical expenses
  10. Wind Energy Producers
  11. Ph.D Students
  12. Electric vehicle buyers.

Below is a chart from the Congressional Budget Office which shows what the effect the Tax plan together with the repeal of the Affordable Care Act: Bottom line – people making $40,000 or less will be paying more. Also, 13 million more people will be off Health Insurance, which means more uninsured people showing up in Emergency Rooms whose bill will eventually paid by the taxpayers and not the bankrupt patients.

 

5. Top Economics Say GOP Tax Plan Will Not Increase Jobs and will cause a large Federal Deficit.

The University of Chicago School of Business asked 38 economists about the GOP Tax Plan. All agreed that trickle-down economics does not work and will only a create more than a trillion dollar federal debt, possibly $1.4 to 1.7 trillion. Some economists think that the deficit will be much more than this. So, Why pass this Tax Plan?!!! This is called a re-distribution of wealth from the middle class to the wealthy.

6. Some Other Things To Think About

With the Republicans purposely creating a huge federal deficit, the GOP have a chance to automatically cut other programs, something the GOP does not like to talk about. Automatic cuts (Paygo) means that the GOP would cut Medicare by $25 billion the first year and $400 Billion over ten years. It would also decrease Medicaid by $17 billion. Customs and Border Patrol, the Student Loan Administration and the Military Retirement Fund would also face the scalpel. But to decrease funds to Social Security, the GOP would have to separately vote on that (as it is not part of Paygo). But the GOP will surely eliminate many programs for the poor and the disabled – meals on wheels, vocational schools, etc, etc. If you hadn’t already known this, this Tax Plan is a bare-knuckled message to everybody: the Republican Party is the Party of the 1%, the ones responsible for the Washington Insiders cesspool, and the ones responsible for the greatest income disparity between the wealthy and the middle class. The Republicans and Donald Trump care not a whit for the working class. In a time of economic prosperity, we are supposed to pay down our debt, not increase it by $1.44 trillion. What happens if we hit another recession within the next 10 years? A total disaster would occur. The Republican Tax plan is totally irresponsible.

 

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