December 12, 2017
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Republican tax cuts help rich, raise deficit — all reasons not to rush it through Congress

Ron Sachs | CNP | Sipa USA | TNS | BDN
Ron Sachs | CNP | Sipa USA | TNS | BDN
House Speaker Paul Ryan makes closing remarks as Senate and House Republicans announce the new tax reform plan endorsed by President Donald Trump in the Capitol in Washington, D.C., Sept. 27, 2017.

Let’s start with the simplest lies Republicans are telling about their tax plan.

It doesn’t benefit the wealthy, they claim. But even a quick look at the framework of their plan, which is all they have released so far, quickly debunks this notion. It drops the top income tax rate, and it eliminates the estate tax and the alternative minimum tax. None of these, of course, will help poor or middle-class Americans.

The changes would reduce the taxes paid by the top 1 percent of income earners by more than 8 percent, according to analysis by the nonpartisan Tax Policy Center. The rest of Americans would see their tax bill fall by no more than 2 percent.

The center calculated that the proposed tax changes would reduce federal revenues by $2.4 trillion over the first decade and $3.2 trillion in the next decade. Changes in corporate tax rates are the biggest reasons for the projected revenue losses.

Which leads us to the next lie: The tax cuts will be paid for through economic growth. This “trickle down” theory has been proven false decade after decade. Even Bruce Bartlett, an architect of President Ronald Reagan’s tax cut of 1981, says tax cuts don’t spur growth. “That’s wishful thinking,” he wrote recently in The Washington Post. “So is most Republican rhetoric around tax cutting. In reality, there’s no evidence that a tax cut now would spur growth.”

So, why did the economy grow in the 1980s? A big drop in interest rates and big spending increases for defense and infrastructure, which increased government spending on goods and services, thereby stimulating the economy, Bartlett wrote.

Along the same lines, Republicans claim that the proposed reduction in the corporate tax rate will lead to higher wages for workers. Evidence suggests this isn’t true, either. After Reagan signed a tax overhaul in 1986 that reduced the country’s corporate tax rate from 46 percent to 34 percent, wages fell for four years.

So, if tax cuts don’t stimulate growth and lawmakers don’t find other ways to offset the loss in federal revenue, the deficit will increase. The tax cuts passed during President George W. Bush’s administration, which were not paid for with spending cuts, are the largest contributor to the country’s growing deficit.

The federal deficit is often used as a rationale for cutting government spending, especially on social services. Republican lawmakers are already moving to cut Medicaid and Medicare spending, in part, to pay for the tax cuts they hope to enact.

Republican leadership in Washington plans to speed a tax cut package through Congress, much like they tried to repeal the Affordable Care Act without health committee hearings, thorough analysis or input from Democrats.

They should not go down the same path with a major tax cut package that isn’t paid for and primarily benefits the rich. If they truly want to simplify the tax code, the supposed reason for their proposed changes, they should do that in a comprehensive way that includes ideas from experts — and Democrats — and that is fully analyzed for its consequences, both on the federal budget and the American people.

 


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