September 27, 2017

ITEP ED on GOP Tax Plan: “There is Something Terribly Wrong with This Picture”

press release

Following is a statement by Alan Essig, executive director of the Institute on Taxation and Economic Policy, regarding the GOP’s tax reform principles released today.

“Since the summer, the GOP and its anti-tax allies have been prepping the public for a major tax overhaul that they claim will benefit the middle class. But, as suspected, the consensus plan released today is in the same spirit as the Trump sketch released in April and reserves its greatest benefits for the wealthy and corporations.

“The plan would slash the official corporate tax rate from 35 to 20 percent and provide two new tax breaks for corporations, allowing immediate ‘expensing’ and creating a territorial tax system. The latter would further incentivize companies to book profits offshore to avoid U.S. taxes. The plan also proposes a so-called tax break for small businesses, but it is structured in a way that mostly benefits the top 1 percent of taxpayers. The plan permanently repeals the estate tax, an unabashed giveaway to the rich given that only the wealthiest 0.2 percent of estates pay the tax in the first place. Further, the plan reduces the top personal income tax rate from 39.6 to 35 percent.

“In other words, GOP leaders are on a path to deliver a pittance to working people and a financial windfall to those who do not need it.

“There is something terribly wrong with this picture. Here’s why: Two important sets of data released this month reaffirm the fact that income inequality remains a persistent problem. The Federal Reserve today released a study that shows the income gap between the rich and poor continues to widen. The wealthiest 1 percent capture a greater share of income (24 percent today v. 17 percent in 1988) and hold a greater share of the nation’s wealth (39 percent today v. 30 percent in 1989) than they did 30 years ago. Meanwhile, Census data released in early September revealed that ordinary families are financially no better off today than they were 20 years ago.

“Our economy is not working for the vast majority of Americans when median income is stagnant and income growth is reserved mostly for those at the top. Economically, the rich are doing just fine, yet the GOP is brazenly selling old hat trickle-down economic theories laden with rhetoric about projected economic growth that will benefit working people. Worse, they are doing so even though opinion polling shows the majority of Americans do not want Congress to pass tax cuts for the wealthy and corporations.”