Congressional Republicans, with White House support, recently announced their long-awaited tax plan, daring Democrats to oppose it. On first look, they are right. Tax cuts make for good politics. Everyone would like to give less to the government and keep a little more for their families. Hard to oppose, right? Well, the time has come to oppose irresponsible tax cuts. Don’t be fooled, the 2017 GOP plan is not about giving money back to middle class and working-class families. According to independent economists, 80% of the tax cuts will go to the top 1% and almost 87% of the tax cuts will go to the top 20%. In fact, the top 0.1% would get almost 40% of the tax cuts. Face the truth, the GOP is again trying to benefit the very wealthy and allow middle and working- class families to bear the burden. Those benefitting from the tax plan are those who do not need it. They make plenty of money and have been making plenty of money for many years, unaffected by the economic challenges that many American families faced for the past ten years. For those working families who might benefit from the provision increasing the standard deduction, most lose any benefit because of the elimination of many of the exemptions upon which they rely and they will wind up paying higher taxes. This is the 2017 Republican Tax Plan working its way through Congress.
In addition to not benefiting most American families, the tax cuts will add almost 5.6 trillion dollars to our national debt. Our national debt is approaching 20.4 trillion dollars, so this tax plan will likely increase the debt by 25%. As a nation, we simply cannot sustain this amount of debt. This level of debt, in dollar amount, as a percentage of actual GDP, and as requiring additional borrowing just to make the interest payments, threatens our economic future and threatens our national security (please see separate article on the blog for a more detailed discussion of the national debt). We simply cannot afford it on any level. Consider the Bush tax cuts. Clearly a popular campaign promise. Then September 11, 2001 occurred. In addition to the tragic loss of life (which we will never forget), there was an incredible cost to the nation. Having determined Al Qaeda operated with Taliban support, we began the war in Afghanistan that continues today after sixteen years. In 2003 we invaded Iraq, commencing another long-term military commitment. Putting aside the debates over those wars, the fact is we did not pay for them, but rather just significantly increased the national debt. If our leaders acted with integrity and focused on what was good for the country, they should have at least postponed the Bush tax cuts to fund the wars. But they did not. Instead, President Obama was pressured to renew the tax cuts, further adding to the debt.
The truth is that we never pay for tax cuts. We recklessly increase the national debt at the inevitable peril of the American people. Remember all the promises. The tax cuts will be entirely paid for by economic gains, by closing tax loopholes, and by eliminating budget waste. Proponents claim the tax cuts will stimulate the economy and create millions of good jobs, so we can collect more tax revenue, reduce the debt, and fund programs. None of these promises were ever true and most certainly not in 2017. What is true is that the U.S. will find itself in a financial catastrophe within ten years. If the so-called Republican Freedom Caucus supports this tax cut after professing an unyielding mission of fiscal austerity, it will completely discredit them as a movement and serve as among the strongest examples of hypocrisy in modern politics. The Freedom Caucus and Congressional Democrats need to block this plan.
Dangerous tax cuts aside, Congress should be exploring tax reform. Unfortunately, the Republicans have a tiny, secret group of backroom elites engineering their plan. This will not lead to anything good for our country. Congress, in a bipartisan and public way, should employ independent, reputable economists to determine the revenue necessary to maintain the essential functions of the federal government and meet our financial obligations. These economists should help create a plan that determines how many tax brackets we need and what the tax rates should be. Until the national debt crisis is under control, the very wealthy may need to pay a little more. This is fair because they can afford it and they alone prospered during recent economic challenges that negatively impacted most average American families. When the debt is paid, then we can discuss tax cut plans.
Congress is talking about reducing the corporate tax rate from 35% to 20%. Those who believe corporations do not pay their fair share will oppose the reduction while those who believe we need to stimulate corporate growth will champion the change. They are both right and both wrong. The problem is that while the corporate rate of 35% is likely too high to be competitive in the global economy, very few corporations pay anything near 35% because of clever tax avoidance schemes. Most pay less than even 20%. The key to success is to establish an appropriate rate and ensure corporations pay that rate. The result will be collecting much more revenue at a lower corporate tax rate. Win for both points of view and a win for the country, especially if this does result in corporations expanding domestically. The same needs to be done for personal income tax. Establish the appropriate tax bracket or brackets and that is what people pay. Although the tax code needs to be simplified in this manner, we do need to preserve a few exemptions that positively impact and protect families facing health crises and enabling children to go to college. Whatever plan Congress passes, it must be focused on simplifying our tax code, fairness to American families, ensuring people pay what they owe, and most importantly getting the national debt under control before it is too late.