Published on December 15th, 2017 | by Joseph Wickline0
Tax cuts and the will of the few
At 2 a.m. on Dec. 2, the United States Senate passed the Tax Cuts and Jobs Act, a sweeping tax reform bill, in a party-lines vote of 51-49. The bill was hastily revised and updated throughout the day on Dec. 1 after deals had been struck with the few Republican senators who still opposed the bill, and forced through the Senate in the dead of night, riddled with errors, bugs and loopholes. Democratic and Republican senators alike had just a few hours before the vote to read the complete 479 page tax overhaul, which includes provisions completely unrelated to taxation. In addition to the repeal or revision of a plethora of tax codes, the bill guts the Affordable Care Act (which Republicans have heretofore been unable to repeal and replace) by eliminating the single-payer mandate. Other provisions allow for drilling in Alaska’s Arctic Wildlife Refuge, and one even seeks to undercut Roe v. Wade by legally establishing fetal personhood.
The bill is an exercise in Orwellian doublethink. While Senate Majority Leader Mitch McConnell called it a “revenue neutral” bill, every major analysis has come to the conclusion that it will increase the deficit by at least one trillion dollars in a decade. While Treasury Secretary Steven Mnuchin argued that the cut will benefit workers, by 2027 many middle and working class Americans will see a tax increase. President Donald Trump has loudly and inanely claimed that the tax bill will not benefit him, but the repeal of the Alternative Minimum Tax and the estate tax along with a slew of other provisions will directly benefit the owners of capital, notably the Trump family. Virtually every facet of the bill has been denied, misrepresented or conspicuously ignored by its authors, and that is to conceal a very problematic truth. This “tax cut” only cuts taxes on the very wealthy. Cuts that will initially benefit working and middle class Americans will be supplanted by increases within a decade to pay for cuts to the rich.
Politicians justify these cuts using “trickle-down economics”, the theory that cutting taxes to corporations and the wealthy will stimulate economic growth (and that the wealth will “trickle down” to the middle and working classes.) During the 1980s, trickle-down theory was widely utilized by the oft-lauded President Ronald Reagan’s administration, then colloquially referred to as “Reaganomics.” While Reagan’s government did steer America out of the 1980 recession, the trickle-down policies came in tandem with a dramatic increase in government spending. In just eight years, the national deficit tripled, turning the U.S. from the world’s largest creditor nation into the largest debtor nation in the world.
In 2001, President George W. Bush used trickle-down theory to combat the 2001 recession. As with Reagan, the tax cuts seemed to work. As with Reagan, the tax cuts weren’t the only economic action by the government at that time. Contemporaneously with Bush’s tax cuts, the Federal Reserve drastically lowered the federal funds rate (an interest rate used by the Reserve to balance inflation and economic expansion) from 6% to just 1.75%, suggesting that monetary policy can take more credit for the 2001 economic revival than tax cuts. And despite assertions that trickle-down policies would help Americans at all income levels, under both Bush and Reagan income inequality worsened. The wealth didn’t and couldn’t trickle-down. It stayed right where the government put it: in the hands of the rich.
Trickle-down is a convenient theory. It’s convenient because it directly enriches the fabulously wealthy. It’s convenient because its chief supporters are the fabulously wealthy. It’s convenient because it neatly justifies a seemingly logical fallacy: cutting taxes on the rich will economically benefit the poor more than working class tax cuts. And it’s convenient because every time it has been deployed, so has another drastic economic strategy that has invariably cost the nation in less immediate ways. Wealth doesn’t trickle down, it bubbles up. By nature, the wealthy are far more able to secure their wealth than the poor, and have little motivation to voluntarily give it up. Trickle-down economic theory is as infeasible as it is unproven, and it’s not likely to be proven any time soon. Because if trickle-down is ever earnestly attempted, in conditions unmuddied by simultaneous economic reform, then it will be proven ineffective. And then the wealthy won’t be able to slash their own taxes anymore.
Even the Tax Cuts and Jobs Acts is not an adequate attempt at this, the only theory that could possibly begin to justify the bill’s existence. Upon any kind of analysis, it’s clear that the bill wouldn’t succeed even if trickle-down were a viable strategy. In order for trickle-down to be remotely effective, tax cuts must act as incentives to corporations and the wealthy, to stimulate new ventures — economic and industrial expansion that would not have been attempted without those incentives in place. The Tax Cuts and Jobs Act instead chooses to eliminate taxes like the estate tax to generally supply wealthy Americans with more wealth, hoping that they will use that wealth for economic growth. That’s just wishful thinking, and the lawmakers who push the bill know it. The point of the Tax Cuts and Jobs Act is to further enrich the wealthy, with no real concern for the rest of the population.
Of course, this bill is not the first decision from the current administration that favors the rich over the majority of the American populace. Ajit Pai’s FCC repealed Title II Net Neutrality regulations on Thursday, Dec. 14, a transparent handout to internet service providers that a majority of Americans oppose. President Trump lost the popular vote in the 2016 presidential election, and only prevailed because of the electoral college, a system initially established as a fail-safe against the voting masses. In fact, the hallmark of governmental action in the past year has been the slashing of vital institutions, from education to the EPA. Justification (if it is supplied) always takes the form of a vague party shibboleth that fails to answer why any rational consumer would support the action. This month’s tax bill is by no means the first such action, and it will not be the last.
The Tax Cuts and Jobs Act is poorly conceived, sloppily written and very, very dangerous. It raises taxes on working and middle class Americans, grants massive handouts to corporations and the wealthy and contains a myriad of amendments and revisions which attack everything from wildlife protections to Roe v. Wade. There is a way to do conservatism right, a way to fight for limited government and protect the personal freedoms of the people. But today’s GOP abandoned those principles long ago. If this bill proves anything, it proves that to today’s Republican Party, the needs of the many are outweighed by the will of the few.