While Americans were transfixed by Senate hearings over Brett Kavanaugh’s alleged sexual assaults, House Republicans quietly passed another enormous tax handout for the wealthiest Americans.
Round one of this giveaway cost $2 trillion. Round two is even bigger—it would explode the deficit by more than $3 trillion. And once again, it’s largely a giveaway to the wealthiest Americans—and could mean devastating service cuts for ordinary people.
President Trump claimed the first tax plan would be “rocket fuel” for the economy, but there’s no evidence it’s done anything to improve the economic wellbeing of working families.
The centerpiece of the first plan was a massive tax cut for corporations. The corporate tax rate was reduced by 40 percent, plus a $400 billion tax break for multinational corporations on their trillions in accumulated offshore profits.
So it’s not surprising corporate profits leaped by over 16 percent in the second quarter of this year compared to the same three months last year—the best showing in six years. Meanwhile corporate tax payments are on schedule to come in $120 billion lower than in 2017.
But corporations aren’t sharing their winnings.
Trump guaranteed working families a $4,000 raise if corporate taxes were cut. Yet average real wages have been stagnant for the past year. Only 4 percent of American workers have gotten any kind of payout related to the corporate tax cuts, and most of those have been one-time bonuses, not permanent raises.
There’s no sign tax cuts have spurred hiring. Job growth under President Trump is merely a continuation of six years of job growth under President Obama—and Obama created more jobs in his last 19 months than Trump has in his first 19 months.
Cutting business taxes was supposed to cause an explosion of investment. Yet business investment has increased at a slower rate this year than at several periods during the Obama recovery.
Instead of investing in workers or equipment, companies are mostly buying back their own stock, a maneuver that artificially inflates the share price and rewards CEOs and wealthy investors. Corporations have announced $733 billion worth of stock buybacks since the Trump-GOP tax law was enacted—103 times more than the $7 billion workers have gotten in bonuses and raises.
For the money McDonald’s spent on stock buybacks, it could’ve given every one of its 2 million employees that $4,000 raise President Trump promised them. But they didn’t.
The economic miracle envisaged by the tax plan’s backers hasn’t materialized. But the dire consequences predicted by the plan’s opponents certainly have. To cover the deficits created by their own tax cuts, Republicans want to cut trillions of dollars from essential public services.
Despite promising never to touch Medicare or Medicaid, President Trump is seeking $1.3 trillion in cuts to those programs and to the Affordable Care Act (ACA). The House GOP wants to cut a total of $5 trillion, including $2 trillion from health care. Trump and House Republicans would also slash funding for students in school and college, among many other service cuts.
Round two of the Trump-GOP tax cuts would only repeat the same destructive pattern: huge handouts to the rich, huge deficits, and huge service cuts for working families. The big difference is that the budget hole created would be much deeper this time, making the resulting cuts to services that much more severe.
No wonder they did it while Americans were distracted.
The sane policy would be to repeal the existing tax cuts for the wealthy and corporations and use the money raised to strengthen Medicare, Medicaid, and other essential services the American people rely on.