Senate majority leader Mitch McConnell sells the lie that the Trump tax cut is going to be good for small business.
When U.S. Treasury Secretary Steven Mnuchin spoke about the Trump administration’s tax plan at the Institute of International Finance, he said the plan would pay for itself without adding to the national debt. This, he said, would be based on what he called “dynamic scoring”. His projections showed ‘a $2 trillion increase in revenues over a 10-year period. So the plan will pay for itself with growth.’
But the tax plan that has just passed Congress and the Senate, in two different forms which are somehow to be merged, shows without all the “dynamic scoring” a $1.5 trillion extra deficit, according to the nonpartisan Joint Committee on Taxation (JCT).
In the past fiscal year, the U.S. deficit was $666 billion. That follows deficits of $585 billion in 2016, $438 billion in 2015, $485 billion in 2014, $679 billion in 2013 and more than $1 trillion in deficits in each year from 2009 through 2012, despite extraordinary efforts to stimulate the economy following the 2008 Wall Street financial collapse.
The JCT study found the Trump tax cut would only return $458 billion of the $1.5 trillion cost over the 10 year period. Meanwhile, as Senator Elizabeth Warren noted in a letter to the Inspector General of the Treasury Department, there is no study whatsoever coming out of the US Treasury on the subject.
Mnuchin’s “Goldman Sachs bluster” with the hackneyed trickle-down metaphors being trumpeted (excuse the pun) all over the media, is intentionally deceptive.
As Professor Ha-Joon Chang at Cambridge University tells us, “trickle down” – the theory that making a few rich creates wealth across the board for everybody – is a totally broken theory. See him in the short clip below.
Mnuchin’s deception is not limited to this. The bill he has rammed through Congress and the Senate, which Republicans jumped at and turned into law in record time because they are worried about their chances in the upcoming 2018 mid-term elections, is actually a massive $6 trillion tax-cut over the coming decade, funded by tax rises which will destroy local economies across the US.
The tax-cut raises $4.5 trillion in taxes on ordinary people, so that the rich can get the $6 trillion, which is the actual full amount of the scam for the corporations and the 1%: a historic number that would have made both Reagan and Bush cringe.
The Tax Policy Center estimated that about 80 percent of the benefit of the tax plan will go to the top 1 percent, with $1.5 trillion going to slash the corporate tax rate, $700bn going to cancel the ‘alternative minimum tax’, paid almost exclusively by the rich, and $150 billion going to repealing the estate tax, which currently exempts the first $11 million of the deceased’s estate, so nobody even remotely middle class pays it.
Furthermore, more than $200 billion in cuts goes to a provision that allows a greater deduction for dividends on foreign earnings, and $600 billion goes to reducing taxes on “pass-throughs” and other businesses not set up as corporations -such as law firms, lobby shops, and doctors’ surgeries.
If some $200bn will be going to allow higher income bands to claim tax credits, whilst individual and family tax rates are cut by about $1 trillion, these are the only elements in the package likely to filter through to the middle classes. As the New York Times noted, by 2027, people making between $40,000 and $50,000 would see a combined increase of $5.3 billion in taxes, whilst, on the other hand, people earning more than $1 million would see their taxes collectively cut by $5.8 billion a year.
The tax rises made to underwrite the $6 trillion giveaway
(1) The tax rises include some $300 billion allowances for companies with offshore profits to repatriate them at a lower rate. Although that cash goes straight to dividends for shareholders and stock buybacks, it gets counted as a tax increase.
(2) Unbelievably $1.6 trillion is raised by repealing the personal exemption everybody gets on their tax returns.
(3) Another $1.3 trillion is raised by going after deductions for state and local taxes, mortgage interest, charitable contributions, interest on student loans, medical expenses, teachers’ out-of-pocket expenses (e.g. for paper and pencils for students). This will devastate local economies.
(4) The new law gradually raises $128 billion in (stealth) taxes by changing the way inflation is calculated, so that your taxes slowly creep up over the years as the brackets come down.
(5) Finally, the law adds about $1.5 trillion to the already eyewatering debt over the next 10 years, and the interest payments that will entail.
The joke: what comedian Will Rogers meant by “trickle-down” during the Great Depression
In 1932, Will Rogers comments on Hoover’s defeat at the hand of Roosevelt:
“The Republicans didn’t start thinking of the old common fellow till just as they started out on the election tour. The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover was an engineer. He knew that water trickles down. Put it uphill and let it go and it will reach the driest little spot. But he didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellows hands. They saved the big banks, but the little ones went up the flue.”
Will Rogers was just telling us what Ha-Joon Chang is saying today.