Posted on March 8, 2019
The Trump-GOP Tax Cuts Are a Huge Failure. Now What?
Shrinking tax refunds this winter have raised renewed skepticism over the Trump-GOP tax plan rushed into law in late 2017. While a smaller refund doesn’t necessarily mean higher taxes, there’s plenty else in the Republican law for working families to complain about.
The so-called Tax Cuts and Jobs Act (TCJA) mainly benefits the nation’s richest people and most profitable corporations. It will cost nearly $2 trillion, which Trump and Congressional Republicans want to cover by cutting Medicare, Medicaid, education and other public services working people depend on.
This is exactly the opposite of what the American people want, which is a fairer tax system that demands more from those best able to pay, preserves and strengthens vital services, narrows economic inequality, and helps create an economy that works for everyone, not just the privileged few.
Republicans claimed their tax cuts would magically pay for themselves. That’s not happening. Tax revenue from corporations—which were the biggest winners from the plan—was down by over $80 billion, or about a third, in the first full year under the new law. Corporations are estimated in 2018 to have kicked in the lowest share of total government funding at any time in the past 85 years.
That big cut in corporate taxes is one of the reasons the TCJA is such a boon for the wealthy, who own the vast bulk of corporate stock, and such a bust for working families, half of whom don’t own any stock at all. Once the law is fully implemented, the wealthiest 1% will get 83% of the benefits.
The GOP assured working people they would benefit indirectly from the corporate tax cuts through higher wages. Trump went so far as to explicitly promise that corporations would give working families a $4,000 raise. That’s not happening either.
Only 4% of American workers have gotten any kind of bump in their pay thanks to the Trump-GOP tax law, and most of those have been one-time bonuses rather than raises. Meanwhile, corporations have been celebrating their tax-cut bonanzas and resulting higher profits by further enriching their CEOs and shareholders through stock buybacks.
Since Trump signed the plan into law, firms have authorized nearly $1 trillion of share repurchases. These divert corporate profits from making new investments or paying higher wages to jacking up the value of stock, which is mostly owned by the wealthy. Companies have spent about 140 times more on stock buybacks than they have on worker pay boosts tied to the tax cuts.
Among industries that gained the most from the Trump-GOP tax giveaway are some of the least deserving. Huge drug companies saved billions of dollars in taxes last year alone and stand to reap a $76 billion tax cut on all the profits they’ve spent years stashing offshore. Those profits were wrung out of American patients and public health programs through the outrageous overpricing of prescription medications.
Big banks crashed the economy a decade ago and were only saved from their own recklessness by bailouts from the American people. Banks enjoyed record profits last year of over $230 billion, boosted by nearly $30 billion in tax cuts. The six largest banks alone, including scofflaw Wells Fargo, were showered with at least $14 billion in cuts and have authorized $72 billion in stock buybacks since the GOP plan was enacted. The “Bix 6” banks have given their workers little in tax-cut-related benefits.
Thankfully, beyond this winter of tax-scam discontent lies a spring of genuine tax reform. Members of the new Congress are finally addressing our broken tax system with the energy the problem deserves.
Rep. Alexandria Ocasio-Cortez (D-NY) reminded us that multimillion dollar incomes used to be taxed at much more progressive levels – 70%. Sen. Elizabeth Warren (D-MA) would attack the crisis of wealth inequality with a small 2% annual asset tax on families worth more than $50 million, with billionaires taxed a bit more. Sen. Bernie Sanders wants to reinvigorate the estate tax, the only current federal curb on the growth of dynastic wealth that destabilizes our economy and undermines our democracy.
On the corporate side, Sen. Sheldon Whitehouse (D-RI) and Rep. Lloyd Doggett (D-TX) have introduced legislation to repeal tax incentives that actually encourage offshoring of American profits and outsourcing of American jobs.
These progressive tax reforms would raise trillions of dollars.
If all this makes sense to you—in fact are wondering why it took politicians so long to figure it out—you’re not alone. Polls show strong, bipartisan support for higher taxes on the rich. We need that revenue to meet our existing obligations to seniors, children and families, as well as make necessary investments in improved health care, repaired infrastructure, a response to dangerous climate change and other priorities.
And we need to restore an economy and society in which everyone has a fair shot, no one is left out or left behind, everyone has the chance to make their dreams come true. Real tax reform—not the scam foisted on us in 2017—can be a major step.
Frank Clemente is executive director of Americans for Tax Fairness, an organization that mobilizes public support for progressive tax reform so we have the revenue needed to protect Social Security, Medicare and Medicaid and make new investments in education, infrastructure and health care to create an economy that works for all. Since 2017, CREDO members have voted to donate over $133,000 to ATF.