As President Trump and GOP lawmakers rush to cut taxes by trillions of dollars over 10 years, they’re ignoring a basic question of good governance: If we’re going to increase our deficits by nearly $2 trillion, are tax cuts that go mainly to the top one percent the wisest way to use that money on behalf of the American people?
There are numerous reasons why big tax cuts for the rich aren’t the wisest course for America and Americans.
First, the tax cuts are designed to help those who need it the least. According to the Urban Center Brookings Tax Policy Center, nearly 80 percent of the tax cuts would go to the top one percent by income in 2027. And let’s not forget, the top one percent is already doing great – their share of national income has jumped from nine percent in the late 1970s to more than 20 percent today. (Those in the top one percent have incomes of at least $912,000 a year.)
Meanwhile, the income of most American workers has languished for years, a point that Trump hammered during the 2016 campaign. Median household income has only recently climbed back to its 1999 peak, after dropping during the Great Recession -– that means nearly a generation has passed since median income returned to its previous high. Moreover, for the bottom 60 percent of Americans, after-inflation wages have remained stubbornly stagnant since 1979. Nonetheless, under the GOP plan, just 8.7 percent of tax cuts would go to the bottom 60 percent of Americans in 2027.
If we’re going to increase our deficits by nearly $2 trillion, are tax cuts that go mainly to the top one percent the wisest way to use that money on behalf of the American people?
Do the blue-collar workers in Michigan, Pennsylvania and Wisconsin who backed Trump favor big tax cuts for the wealthiest? I don’t remember Trump campaigning on big tax cuts for the rich, but I do remember him railing against Wall Street bankers (who will benefit hugely from the proposed tax cuts). A recent Pew poll found that 43 percent of Americans want to raise taxes on the rich, while 24 want to cut their taxes. Trump’s tax cuts seek to reward not the blue-collar workers who elected him, but instead the billionaire campaign donors who are forever demanding more tax cuts.
The GOP plan is stuffed with goodies for the richest Americans -– eliminating the estate tax, reducing the top marginal tax rate, broadening the small business pass-through, cutting the corporate income tax. These measures would hardly help the bottom 60 percent or 80 percent, if at all -– these hard-working Americans need a financial boost far more than the richest one percent and those who have millions to spare to donate to campaigns.
Second, in terms of whether tax cuts are the wisest use of higher deficits, let’s not forget that the U.S. faces a serious infrastructure crisis. Think of the I-35 bridge collapse in Minneapolis and our badly rutted highways, obsolete airports, unsafe railroads and sorely lacking water infrastructure. The Society of Civic Engineering gives a D-plus to the state of America’s infrastructure, and says the nation needs $4.6 trillion to bring our infrastructure up to snuff.
During the campaign, Trump promised to spend $1 trillion on infrastructure, but he has mysteriously downsized that vision to $200 billion. But if Trump and Congress enact tax cuts that push up our deficits by $2 trillion, many in Congress will declare, no way is there any money left to consider a halfway-serious infrastructure plan.
Trump says he’s concerned about America’s competitiveness, but he shouldn’t forget that our D-plus infrastructure undercuts our competitiveness – whether it’s truck drivers losing countless hours in traffic jams, corporate executives snarled in airport delays or workers wasting 90 minutes in the morning and afternoon rush.
Trump’s tax cuts seek to reward not the blue-collar workers who elected him, but instead the billionaire campaign donors who are forever demanding more tax cuts.
The president and Treasury Secretary Mnuchin maintain that the $1.4 trillion cut in the corporate income tax will create jobs and lift wages. But numerous non-partisan studies have found that these tax cuts will do little to increase jobs or wages, but will do lots to increase CEOs’ bonuses and shareholders’ dividends. Similarly, the much-ballyhooed tax holiday that will let American multinationals repatriate hundreds of billions in overseas profits while paying little in taxes is, based on history, unlikely to create jobs, middle-class or otherwise.
If Trump is sincere and serious about creating jobs ― especially solid, middle-class jobs ― infrastructure spending is a far more cost-effective, surefire way to do that than trickle-down corporate tax cuts.
A third reason why big tax cuts are not the wisest course is that America faces a retirement crisis. Some depressing facts ― one-third of American workers are saving nothing for retirement, and for 33 percent of Americans over age 65, Social Security accounts for 90 percent or more of their income. Among people older than 65, the wealthiest 20 percent own virtually all of the nation’s $25 trillion in retirement accounts (and many of them will benefit disproportionately from the proposed tax cuts). Moreover, among Americans 55 to 64 who have retirement accounts, their median retirement savings is just $120,000 – good luck with that if you live to 90. All this helps explain why more Americans are saying, “I’m going to work until I die, because I need the money.”
The nation needs to do far more to help those who face poverty and hard times in retirement. Many of those in Congress rushing to cut taxes on the rich would further squeeze current and future retirees by rolling back the formula on how much Social Security benefits go up per point of inflation. Plenty of lawmakers support this idea even though Social Security benefits have lost around one-third of their purchasing power since 2000.
Moreover, many members of Congress and think tank philosophers want to raise the retirement age to 70. That’s easy to support if you have a cushy office job, a trust fund, or a $1.5 million nest egg. But for Americans who have done blue-collar, physical work since age 18 – whether factory workers, construction workers, janitors or others – raising the retirement age to 70 would be cruel. If policymakers are serious about helping blue-collar workers, they would increase Social Security benefits instead of lavishing trillions on tax cuts on the rich.
The nation of course has many other huge problems. Our high rate of poverty. Our many failing schools. The millions of young people who can’t afford college. The need for flood-proofing because of rising sea levels. The more than $200 billion needed for repairs and rebuilding after Hurricanes Harvey, Irma and Maria.
If policymakers truly want to help the pocketbooks of tens of millions of struggling Americans, there are far better ways than cutting taxes on the rich. Policymakers could substantially expand the earned income tax credit or increase childcare subsidies and credits for middle-income and moderate-income families.
Let’s be clear what’s happening here – many in Washington are pushing the tax cuts to help those who have done the most to elect them: the wealthy donor class, while they have the gall to deny that the plan will even help the wealthy. They’re dressing it up as helping the middle class and working class. But nobody should be fooled.