{"id":8335,"date":"2017-11-15T00:46:31","date_gmt":"2017-11-15T05:46:31","guid":{"rendered":"http:\/\/marcstier.com\/blog2\/?p=8335"},"modified":"2020-06-02T10:52:09","modified_gmt":"2020-06-02T14:52:09","slug":"the-house-gop-tax-plan-redistributing-wealth-to-the-wealthy","status":"publish","type":"post","link":"https:\/\/marcstier.com\/blog2\/?p=8335","title":{"rendered":"The House GOP Tax Plan \u2014 Redistributing Wealth to the Wealthy"},"content":{"rendered":"\n

President Trump loves superlatives. Everything he does is record-breaking, the biggest or the best. And that goes for the tax cut plan he will sign if the House Republicans have their way. It won\u2019t be the biggest tax cut in American history. But it will the most one-sided tax cut in our history with most of the benefits flowing to the top 1% of Americans.<\/p>\n\n\n\n

The House plan is truly an extraordinary piece of legislation.<\/p>\n\n\n\n

No tax proposal in American history \u2014 not even the big tax cut put forward by President Reagan \u2014 ever proposed giving 75% of the tax cuts to corporations and other large businesses.<\/strong><\/p>\n\n\n\n

Yet that is what this plan does. It proposes a steep drop in the corporate tax rate from 35% to 20%. And rather than close the loopholes that allows most corporations to pay an effective tax rate of only 14%, it makes those loopholes even larger. It allows the huge American corporations like Pfizer, ExxonMobil and many Wall Street banks to pay only 20 cents on the dollar when they repatriate their $2.6 trillion in off-shore profits. And then it makes this hand-out to huge corporations permanent, by allowing American corporations to escape all future taxation on profits made abroad.<\/p>\n\n\n\n

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The recent release of the Paradise Papers shows us exactly what that means. Under this provision American corporations will now be free to do what they do to European countries (and what 71% of Pennsylvania corporations have done to avoid paying any state corporate taxes): jigger their books so that they earn most of their profits in the Bahamas or the Cayman Islands rather than in their home country, thus escaping almost call corporate taxes. And they will also have every incentive to have American operations, and jobs, follow their profit abroad.<\/p>\n\n\n\n

The House GOP hand-out to our largest businesses does not stop with corporate tax cuts. It also proposes to allow the owners of pass-through entities, such as limited partnership and S-corporations, to pay taxes not at their individual rate, as they do now, but at a low rate of 25%. While some pass-through businesses are small, many are quite wealthy. Investment firms, real estate development firms, medical and legal offices, even huge companies like Bechtel are organized as pass-through entities and their owners receive very high incomes that, under the House plan, will be taxed at substantially lower rates than they currently are.<\/p>\n\n\n\n

This proposal is being presented as an aid to small businesses. But over 90% of pass-through business owners already pay at a rate of 25% or less.<\/a> The benefits of this proposal will actually flow to the very richest Americans who currently pay at higher rate. About 70% of partnership and S corporation income now goes to the top 1%.<\/a> The pass-through provision is horribly unfair in that it allows professionals and others whose work is structured as a pass-through entity to do exactly the same work as wage earners and yet pay substantially less in taxes.<\/p>\n\n\n\n

And like the corporate tax proposals, the GOP plan for pass-through entities creates a giant loophole. It will encourage very high wage earners to organize pass-through entities that contract with their current employer. Don\u2019t be surprised when the first Fortune 500 CEO making $10 million a year is paid as a contract employee in order to reduce his marginal tax rate from 39.6% to 25%.<\/p>\n\n\n\n

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No tax proposal in American history is less beneficial to our economy.<\/strong><\/p>\n\n\n\n

Republicans defend the huge tax breaks to business as a way to generate more business investment that will, in turn lead to economic growth. Though the American economy continues to grow as the effects of the Great Recession move into the past, additional investment might lead to faster growth. But there is no reason to think that tax cuts for business will generate new investment.<\/p>\n\n\n\n

With corporate savings<\/a> and business profits near record highs<\/a> with while interest rates are near record lows<\/a> businesses have little trouble find funds to invest. What American businesses do need is new customers who can purchase their good and service. But finding those customers is hard because incomes for all but the top 1% are stagnant.<\/p>\n\n\n\n

So what does the House bill do? It provides more income for the very rich \u2014 exactly the people who are least likely to spend their additional income.<\/p>\n\n\n\n

What would increase consumer demand is a substantial increase in the post-tax income of working and middle class families as a result of targeted tax cuts or, even better, increased wages brought about by a higher minimum wage; support for labor organizing; new infrastructure spending; expansion of programs that benefit working people; or reductions in health care premiums and out of pocket expenses.<\/p>\n\n\n\n

But the House Republicans are not really interested in spurring the economy forward. Their real goal is to reward the corporate elite who bankroll their campaigns.<\/p>\n\n\n\n

No tax proposal in American history has ever been so weighted towards benefiting the top 1%, the owners of the corporations and businesses so richly rewarded by the House GOP tax bill.<\/strong><\/p>\n\n\n\n

The consequences of the tax bill for Pennsylvania when all its provisions go into effect in 2027 strikingly demonstrates who the Republicans aim to serve:<\/p>\n\n\n\n