It’s super hard in the current political climate to find statements on which all Americans can agree. One of those rare statements is that our tax laws are complicated and distort the economy. As a small-business owner, I was excited when House Speaker Paul Ryan started talking tax reform.
America has a high corporate tax rate and then lots of specific write offs that lower the rate businesses actually pay. This system largely benefits the wealthy who can afford to hire tax planners. The system also incentivizes particular assets and business decisions that get the best tax breaks, even though they may not create much value for the economy.
Simplifying this system could raise revenue for the government, get rid of incentives that distort business decisions and be more fair, as lower-income people wouldn’t need a tax adviser to navigate the system.
That’s what I was hoping for, but pretty quickly “tax reform” changed to “tax cuts.”
Republican leaders in Congress made the decision to attempt to pass a bill using the reconciliation process, which only needs a simple majority and therefore avoids the need to negotiate with Democrats. The decision-making changed from choosing which tax loopholes to get rid of to who gets a piece of the $1.5 trillion cap in losses to government revenue that the reconciliation process allows.
Most news coverage has focused on the plans details — increasing the standard deduction, cutting taxes on pass-through income, or abolishing the estate tax. That focus obscures the bigger picture. The big picture is tax cuts for specific groups of people and the loss of $1.5 trillion for the government over 10 years.
That’s $1.5 trillion the government won’t have to fix roads, bridges and ports. That’s $1.5 trillion the government won’t be able to spend on preventing catastrophic wildfires. That’s $1.5 trillion the government won’t be able to spend on infrastructure to divert stormwater and prevent catastrophic floods.
So what does America get for $1.5 trillion? House and Senate leaders are proposing to give that money to the super wealthy by abolishing the estate tax and cutting the corporate tax rate. A small portion will go to the middle and upper middle classes as an increase in the standard deduction. People lower on the economic ladder usually don’t pay enough taxes or make enough income for the increase in the standard deduction to help much.
As a 35-year-old small-business owner, this looks disgustingly irresponsible. We still have to spend money on fixing aging infrastructure. We also have to spend massively on Social Security for all the retiring baby boomers. Cutting the corporate tax would marginally help some business growth, but it’s going to blow a $1.5 trillion hole in an already soft federal budget. Allowing the ultra wealthy to pass billions on to their kids tax free rather than provide real relief to lower-income Americans will most likely decrease economic activity. I plan to be alive 30 years from now.
This tax cut plan looks like a private-equity, smash-and-grab buyout: Take over a company, load it up with debt to pay money out to investors, then sell the company and leave the new owners with the debt. That’s what the current tax bill does: It doles out money to the socio-economic groups Republican lawmakers belong to at the expense of our country’s future.
I want economic growth and less regulation, but the current tax bill is a bad deal for America. This is crony politics. This is tip-toeing toward kleptocracy.
Ned Swain is a small-business man who owns and operates local Muscle and Devenish Wines in Portland.
Follow BDN Editorial & Opinion on Facebook for the latest opinions on the issues of the day in Maine.