Like a stocking full of coal (particularly apt this holiday season), the Trump/Ryan/GOP tax boondoggle has arrived.
As we might have expected, our so-called “leaders” have staked their bill on corporate tax cuts (from 35 to 20 percent). The majority of Americans oppose these cuts (Pew Research Center), but what does the will of the people have to do with reality? Trump, Mnuchin, and Cohn have been relentlessly parroting the tired line that the U.S. corporate tax rate is too high. On the surface, they appear to have a point. The U.S. rate stands at 39% versus 30% in Germany and 24% in the UK. Yet our “effective” corporate tax rate (once you factor in the bundle of goodies they’re able to deduct: cost recovery allowances, interest deductability, and expensing research & development) is actually around 18.6% which puts us in line with the UK rate of 18.7 %, and much closer to Germany’s rate of 15.5%.
It’s likely that slashing our corporate tax rate will instigate a race to lower corporate taxes across the globe. That will only benefit the rich. The rest of us will pay a price the country can’t afford. Trump supposedly wanted to call this the “Cut, Cut, Cut Bill”. Apart from his desperate need to simplify everything (how else could he hope to understand the issues?), he’s accidentally right--but not in the way he intended. In order to pay for the massive additions--an estimated $2 trillion dollars over 10 years--to the deficit that will be caused by this corporate giveaway, the government will cut funds for education, cut funds for health care (Medicaid), and cut funds to safeguard the environment. Cut, cut, cut... but not for Trump, Robert Mercer, the Koch Brothers, Sheldon Adelson, and the other bloated GOP cash cows.
A few other tidbits to demonstrate their largesse: Although they’ve made a show out of keeping the highest tax rate (39.6%) in place, they’ve more than doubled the threshold at which that top rate kicks in--from $400,000 to $1 million (for married couples). Nice sleight of hand. They’ve also made wealthy families eligible for expanded child credit!
If one wants to study the results of Republican tax policy in action, the disastrous Kansas tax experiment stands as a terrifying testament.
Trump and company would undoubtedly love to say “let them eat cake” (and probably do behind closed doors). My hope is that resistance to their insatiable greed will continue to grow and 2018 will see their power begin to crumble.