Bill Barclay
The Trump/GOP “Unified Framework” tax plan has
something for everyone – if by everyone you mean the wealthy, corporate and
non-corporate businesses and the alt-right.
The plan embodies both the neoliberal class warfare that believes poor
people have too much money and rich people have too little money and connects
with the social conservative politics that the Trump and the GOP draws upon to
mobilize its supporters.
Class Warfare: I
Some of the class warfare politics of the Trump/GOP
proposals are obvious; others less so.
The proposal provides a small
tax cut for households in the bottom three quintiles,
ranging from about 0.5 – 1.2% of after tax income in all cases well under the
$1,182/family income boost claimed by Rep. Paul Ryan. At the upper end of the income pyramid, the
story is much different. Over half of the
total tax cuts for individuals will accrue to the top 1% of households,
boosting their after tax incomes by 8.5%. Of course, life can be even better: the
top 0.1% households would grab an average tax cut of almost $750,000, capturing
over 30% of the total tax cuts for families and individuals.
And
Trump has not neglected people like himself.
He – and others in his income and wealth sphere – will gain in three
ways from the changes in the individual income tax. First, the elimination of the alternative
minimum tax (AMT): in 2005, Trump paid $38.4 million on income over $150
million – but without the AMT he would have paid only $7.1
million.
Second,
capping the tax on pass-through income at 25% will benefit Trump, with over 500
of these vehicles as well as other users of pass-through
entities such as hedge fund managers. But
maybe this provision is part of Trump’s job creation program: it will
undoubtedly encourage an industry designed to help high-income individuals,
otherwise subject to the two higher rates of 35% and 39.5%, try to turn
themselves into pass-through entities.
For example, Joe Smith, CEO of XYZ Co. receiving $7.5 million annually
and paying 39.6% on his income over $1 million, could restructure himself, as a
pass-through entity that sold management services (Joe Smith) to XYZ Co, and
pay a maximum
rate of 25%.
The
class warfare politics that underlie much of the proposal are starkly illustrated in the proposal
to phase out our only non-residential wealth tax, the estate tax. Heirs to the large agglomerations of
inherited wealth and class power that Theodore Roosevelt attacked with the
estate tax at the beginning of the last century will rest more easily at
night.
To
this point, the plan looks like pretty standard neoliberal policy: upward
redistribution. As Yogi Berra might have
said, “It’s deja vu all over
again.”
Geopolitics
But
the Trump/GOP plan also has a geopolitical thrust as well. The proposal would
eliminate the deduction for state and local taxes (SALT). This deduction is claimed by about 20% of
filers but about 33% of the total value of the deduction goes to households in
two states: California and New York.
Overall, the 6
states where tax payers deduct the largest amount under the
SALT deduction all voted for Clinton in 2016 (OR, MD, NJ, NY, CA and CT).
Targeting these states is also good neoliberal social policy: these are among
the states that do more in terms of a social wage than the average state, and
all are have a larger
share of unionized workers than the national average.
Helping
the Alt-Right
Some
less commented-upon parts of the plan seek to link neoliberal economics to
social conservative political goals.
Three examples are illustrative. The
plan:
· codifies
the “rights of unborn children” into federal law, declaring “a child in utero means a member of the species Homo
sapiens, at any stage of development, who is carried in the womb;”
· seeks to repeal the Johnson amendment that prohibits tax-exempt
organizations, such as churches, from engaging in political activity; and
· would also make it more difficult for immigrant parents to
claim the child tax credit even if their children were born in the United
States.
Class Warfare: II
Senator
Elizabeth Warren called out the Trump/GOP plan for a $2 trillion give-away to
large corporations, singling out Wells Fargo, the poster child for bank
corruption, as a major beneficiary. Her
attack was on the proposed cut in the corporate income tax rate from 35% to 20%
and the proposal for a one-time chance to repatriate profits stashed “overseas.”
(Most of the almost $3 trillion that U.S. financial and non-financial
businesses hold “overseas” actually resides in the US. It is only “overseas” for tax-accounting
purposes.) The iconic neoliberal company Apple would be the largest beneficiary
of the latter provision, with over 90% of its cash and marketable securities
held “overseas.”
Fighting
Back
How
do we organize against the Trump/GOP proposal?
We need to attack both the “middle- class tax break” and “job creation”
cultural memes that Trump and his allies are already hyping. The simplest way to counter the first point
is to compare the tax cuts for middle-income households to those for high-income
households as done above.
The
job-creation meme requires a little more thought. Many people believe that, if businesses have
more money, they will invest and hire more workers, thus creating more jobs and
perhaps raising wages. (We owe much of the cultural strength of this “common
sense” to the arguments of mainstream -economists as echoed in the media.) There are several flaws that we should
articulate early and often. First, yes,
compared to the past, new investment has been low since the onset of the Great
Recession. But, second, this is not
because of low profits for U.S. companies – profits are a record levels. Third, so what have companies been doing
rather than investing these record profits and creating jobs – speculating in
financial markets and using much of their huge profits to buy back their
stock. This boosts the pay of top executives
and shovels more wealth into the top 10% of households that own almost 80% of all
stocks – but does nothing to create jobs.
One
good place to get more talking points and agitational ideas: NotOnePenny.org. Many of the organizations that DSA members
and chapters work with are already partners in this group. DSA should also join in order to continue
Sanders’ fight about against the obscene levels of inequality that triggered so
much support for him in 2016.
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