The American colonies began their revolt against the British Monarchy over oppressive tax policies. Since that period, Americans have always looked upon government tax policy with suspicion. In the early nineteenth century, our ancestors questioned the need for tariffs and government secured loans to fund infrastructure projects such as canals. Later in that century, our government cleared the way for the expansion of homesteading and eventual construction of a national railroad system. By the beginning of the twentieth century, Republican Presidents began to explore the need for taxes to support government programs that might enhance this American expansion. They wanted to support the ongoing industrial revolution and its impact on improving Americans’ standard of living. The debate for and against a national income tax “without apportionment among the several States” was carried forth during the Presidency of Theodore Roosevelt and finally formalized in the Sixteenth Amendment under the Presidency of William Howard Taft. Neither of these Republican Presidents could foretell a time when their attempts to fund government programs would instead become a means for bankrupting the American government.
Our contemporary times have witnessed the argument over tax policy devolve into questions of who should benefit by it and of how it might affect the national debt. Should the government spend its tax revenue on programs that help citizens support their families, gain an education, enter the workforce, overcome discriminatory practices, maintain the peace and safety of their community, and secure their “certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness?” And should the government outspend its tax income to the detriment of future tax payers saddled with an unsurmountable debt? These two questions appear diametrically opposed inasmuch as they assume an inverse either/or equation.
These questions have riled our legislators in recent decades. The current tax proposals in Congress give evidence to an ongoing debate. According to Senator Orin Hatch, “We’re spending ourselves into bankruptcy. Now, let’s just be honest about it: We’re in trouble. This country is in deep debt. You don’t help the poor by not solving the problems of debt, and you don’t help the poor by continually pushing more and more liberal programs through.” Does the Senator believe that he is helping the poor by “pushing more and more” regressive programs that will increase the national debt? “Regressive” in this Republican Party context generally means “broadening the base” by raising taxes for the less well off in order to decrease taxes for the more well off and for large corporate entities. In the new lexicon of the moment, it is possible to raise taxes by eliminating deductions while loudly proclaiming a tax rate “reduction.” In fact, Hatch has ironically “settled” the debate by equating efforts to “help the poor” with “spending ourselves into bankruptcy” while advocating for a tax policy that will increase the national debt by 10%. The inconsistency in his argument can be rationalized by a blind faith in future growth stimulated by tax breaks for corporations—a supposition that recent history has twice disproved. Reputable analysts have used dynamic scoring to account for this dynamic increase in job growth and have shown the possible effects of this regressive tax policy. Although only a .4% increase in GDP would eliminate half a trillion dollars in our national debt, the actual dynamic scoring on the Senate’s tax reform proposal resulted in only a .04% growth in GDP. This level of growth may be insignificant for it is within the forecast’s margin of error. If this tax proposal cannot be rationalized, then only two debt reduction strategies remain: taxes will have to be raised; or so-called “entitlement” programs may have to be diminished or eliminated altogether. The current tax proposal raises taxes for some low/moderate-income citizens and eliminates funding or sets the stage for future defunding of programs that support education, job training, anti-discrimination programs, healthcare, retirement security, and environmental protections.
Who can be believed? We are living during a time when the statements of all authorities are questioned. There really is such a thing as “fake news.” In the midst of politicians’ distortions, prejudiced news sources, and foreign “influence programs,” where do we find fact based information? Well, let me offer the PBS News Hour. Check out the three tax charts PBS constructed to assess the effects of the current Congressional tax policy proposals on the rich and poor in America. If these graphs don’t draw the picture, then the closing statement is a good summary: Republicans are making taxes less progressive. In other words, they are shifting the burden of taxation from the higher income levels to the lower. Although this shift appears nominal in percentages, the multi-billion-dollar shift has much more significance to the average wage earner than to the billionaire class. it has two negative social results: it punishes those least able to afford any reduction in income; and it exacerbates the income inequality that already exists and currently threatens our democracy. In addition, it worsens the national debt, assuring the need to address future spending cuts. Even with so-called “dynamic” scoring, the national debt is still forecasted to increase to 14.5 trillion. One can only wonder whether Congress will once again raid the Social Security trust fund and increase the existing 6 trillion already borrowed. Such “borrowing” is really stealing from future generations. It is an example of the kind of profligate spending that risks the stability of the Social Security system.
Now, if these concerns don’t trouble the average citizen, consider the underlying hypocrisy of the GOP. Remember the so-called “Grand Bargain” during the previous Administration. It failed for several reasons. But the overall issue was the GOP assertion that any change in the tax code MUST be revenue neutral, i.e., it must not increase the deficit. Pres. Obama proposed balancing any cut in the top rate for corporations with off-setting elimination of tax loopholes. Most conservatives, like myself, applauded any effort to “level the playing field.” Well-paid lobbyists have long tilted tax policy in favor of their well-heeled constituents. The “Grand Bargain” could have stimulated business competition and the economy. But House Republicans preferred a reduction in entitlement spending (though they diverted blame to the President for changing the terms of their initial agreement). Now, we have a tax reform package that is NOT revenue neutral, but deficit increasing—by as much as 1 to 1.5 trillion dollars. And that increase not only sets the stage for future reductions in entitlements but also does nothing to promote business competition. It also becomes difficult to overturn. Can you imagine some scenario where big corporations and the mega-rich would allow their taxes to be increased in the future? Instead, they would pour millions into the coffers of GOP campaigns to assure their tax benefits remain intact. In fact, donor campaign funding is the likely desired alternative.
If the above conclusions seem more partisan than democratic, then you might consider another aspect of this Republican tax proposal. Tax payers in high tax States like NY and CA will pay more in Fed. taxes. College students with loans and tuition waivers will also pay more – probably discouraging many to forego college. What do these groups have in common? They’re largely Democrats. If you couple these actions with the recent Trump disregard for the Puerto Rico recovery, you would have to acknowledge the possibility of a sinister disregard for any Democratic leaning constituency. Some may consider these examples of a simple partisan or tribal divide in American politics. In other words, “it’s just politics as usual.” But the underlying motive is simply a bare-knuckled power grab. The centralization of power in any democracy is the beginning of the end for that democracy. Whether it’s an unfair tax policy, voter suppression, gerrymandering, or attempts at biasing judicial appointments, the intent is the same. And that intent is undemocratic and un-American. History may even call it perverse, if not actually subversive.
Perhaps the Republican Party has been the minority Party for far too long and has simply forgotten how to govern within our Constitutional framework. Perhaps, as some political pundits claim, the GOP has just fallen prey to an aggrieved substratum of our population and to its avowed representative in our President. But the fact remains, that this President and this Republican-controlled Congress have done nothing to appease the plight of wage earners or the unemployed who have experienced wage stagnation or job loss to technology, respectively. They could, for example, raise the minimum wage (perhaps proportional to each State’s wage profile). They could advance a tax policy that is more progressive with the intent of reducing income and wealth inequality. They could make higher education more affordable and even target occupational training for the emerging job markets (for example, renewable energy, healthcare expansion/reorganization, or new internet empowered jobs). They could promote competition in the business market by eliminating tax preferences won by corporate lobbyists. They could energize the small business community by making employee healthcare more affordable, by revising patent laws, and by easing start-up regulations and simplifying reporting regulations. Instead of simplifying and reforming the 75,000 pages of the tax code, they are reconciling an additional 500 page amalgam of backroom tax proposals that few, if any, in Congress have even read.
Why have they not pursued the populist policies they claim to be pursuing? Instead, they are about to pass a tax law that will save the President millions, and his family, billions. It will also reduce the corporate tax rate without eliminating any tax preferences and without providing any wage relief to low income workers. Nevertheless, the President and Republican leadership in Congress claim their tax proposal favors the middle class. Why do their actions belie their words?
The answer can be found in the intent behind those words. The Republican congressional leadership promotes policies that benefit its wealthy donor class and its desire to stay in power. The President administers the Executive Branch to suit his interests and the extension of his influence and power. Both elected branches of our government show little regard for our general welfare, except in the words they use to camouflage their intent. To state what should be obvious, this tax policy is misnamed as reform. It is regressive in its economics and abusive of our Constitutional ideals.
We cannot allow our democratic republic to slip into a Russian-style kleptocracy!
**Disclaimer: The tax bill now being reconciled between the House and Senate is not complete. On the surface, it appears to lower taxes across the board for all taxable units. But it eliminates popular deductions for individual tax payers, while keeping those tax preference items used by big business and the very rich. In addition, some tax loopholes are widened, such as pass-through income (favored by privately held companies, like those owned by the Trump family) and carried interest (which President Trump said he would eliminate). In addition, the estate tax would be eliminated altogether—a gigantic gift to the super wealthy (which could provide a two-billion-dollar bonanza for the Trump family). Until the law is finally passed, no accurate appraisal can be made of its effects. Since our legislators created this tax bill without public hearings and voted on it before reading it, it should not be surprising that they have difficulty explaining what is in this tax legislation. They can, however, tell us what they think we want to hear. **