“President Trump’s Trickle Down Tax Plan is somewhere between indefensible and obscene. “What kind of people see the devastation of Harvey, Irma, and Maria; watch Houston residents wading through the streets; and see Puerto Rico in total darkness and think to themselves “Wow, millionaires really need a tax cut?’”
“The Trump Tax Plan is nothing but a payoff to millionaires and multinational corporations. It is an embarrassment to history, common sense and decency that any elected official continues to perpetuate the fraud of Trickle Down Economics, particularly one who ran promising to help the middle class. Time and again the epic lie of trickle down has served as the justification to taking money that belongs to the American people and handing it over to a few thousand well-connected political donors. They pretend like its a philosophy. This is not a philosophy, this is a pay off.”
The group went on to make several specific points about some of the details of the tax framework:
“- On the elimination of the Estate tax: “We can’t wait to hear President Trump try to explain how a $4 billion tax cut for Ivanka and Tiffany helps the middle class.”
“- On the reduction of the top rate: “Lowering the top rate for America’s richest people in the face of already destabilizing inequality is irresponsible bordering on immoral.”
“- On the repatriation of profits: “So the Trump Administration has decided to reward companies for essentially stealing American taxpayers’ money by hoarding it overseas. How is that good for the middle class?”
“- On the reduction of the corporate tax rate: “Randall Stephenson, the chief executive of AT&T is wrong. The correlation between lower corporate tax rates and more jobs is not ‘very, very tight,’ it is nonexistent. From 2008-2015 the company paid an effective rate of 8%, they laid off 80,000 people, and Mr. Stephenson cashed in $124 million in stock options. Companies do not hire more people when you lower their tax rate, they overpay their already overpaid executives.”
“- On the elimination of the AMT: “The elimination of the Alternative Minimum Tax will virtually guarantee that thousands of Americas wealthiest people will pay no tax at all. Who will be left holding the bill for that lost revenue? The middle class.”
“- On the territorial tax system: “President Trump’s big plan to boost the middle class starts by helping multinational corporations avoid paying any taxes at all.”
“- On reducing the number of tax brackets: “If anything, we need more tax brackets. Someone making $5 million, $10 million, $50 million a year has almost nothing in common economically with someone who makes $400,000 a year. And they should be taxed at a significantly higher rate.” ( Patriotic Millionaires, September 27, 2017.
My comment: they might represent a small minority of rich people; they might be toothless in the face of the ravening greed and lack of care for others that is on full display from the Republican Party. But I follow the statements the organisation “Patriotic Millionaires” because they demonstrate that not all rich Americans are selfish and immoral, trotting out all the well-worn lies and self-justifications we have seen for decades. They are joined by most economists truly interested in the future of the United States, honest economists who believe that trickle-down economics is a con-job and that this latest plan will increase the deficit out of sight. Epicureans believe in working together in mutual understanding and harmony. The only interpretation of this tax reduction plan for Party funders is the single word: corrupt.
As a general rule, I’m in favour of slightly reducing taxes, at least in Europe. But America is very much a different case, and for quite a few reasons:
1) America’s deficit is unusually large, the largest in the OECD. This means that any tax plan must place reducing the deficit as the top priority. Now American conservatives often claim that reducing taxes will increase tax revenue- the Laffer Curve effect. But I believe conservatives have exaggerated the effects of the Laffer Curve. In reality, lower taxes will result in less tax revenue as a percentage of GDP. So if reducing the deficit is a priority as Republicans often claim, reducing taxes cannot be an option.
2) America’s taxes are unusually low. Republicans often use America’s high headline corporation tax rate to prove that America’s taxes are the highest in the world. This is totally false. As a proportion of its GDP, America collects less taxes than any other major developed country. Even corporation tax revenues are very low. So you cannot claim that tax rates are making America less competitive when so little revenue is coming in.
3) American levels of poverty and inequality are very high by developed world standards. There is no other country with a comparable GDP per capita that suffers from the levels of deprivation America does. So American policymakers should prioritise reducing poverty levels through investments in infrastructure and education before lowering taxes.
4) American economic growth rates are good by developed world standards. The main justification for lowering taxes is that it will boost economic growth and create jobs. But America already has growth and a low unemployment rate. Rather, America’s public services and utilities are patchy for a country that rich, suggesting that the revenues gained by raising taxes would be more beneficial for the country than the economic growth gained by lowering them.
5) Tax reform is a more urgent matter than changing tax rates. What makes the American economy more uncompetitive is not the burden of tax rates, but the time taken to pay them. Americans spend far too long filling out their tax forms, unlike countries like Sweden where the government does people’s tax returns for them. The sheer complexity of the system allows big corporations to exploit loopholes, while small businesses and individuals pay the high headline rates. Before any talk of reducing tax rates, politicians should close the loopholes, simplify the system and crack down on tax evasion. The resulting increase in revenue will give them some scope to lower taxes.
Having said all that, I also believe tax reform is more important than raising taxes, contrary to what many Democrats think. Before we consider adjusting rates, we should create a more transparent tax code. Once the results from that become clear, we can then see how rates should change- depending on the size of the deficit and the state of public services then. I think an immediate tax hike based on an irrevocably flawed tax code would be a mistake. It’s also worth considering that the top 1% already pay almost half of all federal income taxes, while the bottom 47% pay nothing. It’s very hard to imagine a more progressive system. So if Democrats want to raise significantly more tax revenues, they will have to tax the poor and the middle class more, not just the rich.