Just Taxes Blog by ITEP

Lawmakers Are Allowing Monied Interests to Trump the Voices of Their Constituents

Lawmakers Are Allowing Monied Interests to Trump the Voices of Their Constituents

November 30, 2017

Alan Essig
Alan Essig
Executive Director

George Washington is said to have described the U.S. Senate as the body that cools the passions of an impulsive House of Representatives just as a saucer cools tea. But current Senate leaders appear to think of themselves as more of a Bunsen burner.

The Senate Finance and Budget committees’ quick approval of a major tax cut enables Trump and the Republican leadership’s plan to give colossal tax breaks to corporations and the wealthy. Our elected officials are cavalierly ignoring the wishes of the American people and setting the nation on a damaging path that will redistribute wealth upward, balloon the deficit and starve the federal government of resources necessary to meet basic priorities.

Lawmakers may like this tax plan, but their constituents do not.

A FiveThirtyEight news report released Wednesday confirms that the plan barreling its way through Congress (without so much as a single public hearing) is historically unpopular when compared to other tax cuts dating back to the Reagan Administration. In fact, the current plan to cut taxes is more unpopular than were tax hikes in 1993 under President Clinton.

In other words, in spite of a well-funded misinformation campaign that seeks to convince low- and middle-income taxpayers that top-heavy tax cuts will benefit them, the vast majority of people are rejecting the Republican leadership’s snake oil. It doesn’t take a tax wonk to identify dubious trickle-down economic promises.

Multiple independent analyses of the proposals moving forward in the House and Senate (ITEP, TPC, and JCT) have revealed both plans would shower the greatest benefits on the top 1 percent, albeit to differing degrees. These analyses are evidence enough that lawmakers seek to boost the fortunes of the already rich at the expense of the rest of us, but the Senate’s path forward is unabashed proof that working people are at most an after-thought.

Senate tax writers repealed the individual health mandate established under the Affordable Care Act (Obamacare) to help pay for a tax cut for corporations and the rich. This is crude and immoral, no matter how insistently lawmakers claim that destabilizing health care markets by removing one pillar of a three-legged stool would provide “choice” to people who do not want to purchase insurance.

It’s obvious their goal isn’t to provide “choices” that would increase access to health care. Rather, it’s a cynical, political calculation. They are betting that repealing the mandate would cause a significant number of lower-income people to forego signing up for health insurance and, thus, the federal government would save north of $300 billion over 10 years in subsidies to help resource-limited families pay for health care. A CBO analysis of the plan estimated 13 million people could lose health coverage as a result of this provision. But don’t worry. The $300 billion saved would help finance tax cuts for the rich.

This regressive provision is the tip of the iceberg. Senate tax writers poured even more salt into an oozing wound by expiring tax cuts for individuals after 2025 while maintaining tax cuts for corporations. Repealing individual tax cuts that only provide a pittance to low-income people in the first place while maintaining tax cuts for corporations (which are doing more than fine under the current tax system) is further evidence that writers never intended to craft a tax plan that would benefit working people.

There are a few token provisions in the Senate bill to make it palatable for more moderate Republicans such as an expansion of the child tax credit. Sens. Marco Rubio and Mike Lee proposed an amendment to make this provision more robust and to pay for it by lowering the corporate tax rate to 22 percent instead of 20 percent. Such a provision would do little to change the plan’s overwhelming tilt toward the wealthiest Americans. But throwing these few crumbs to working people is apparently too much for anti-tax advocates and their congressional allies to bear. Americans for Tax Reform, a Koch-brothers funded anti-tax group, released a statement claiming that a corporate tax rate of 22 percent would “hinder economic growth.”

ITEP’s analysis of the Senate plan reveals that typical taxpayers in every income group except the top 1 percent would face a tax increase during the later years of the plan. That’s right. This so-called middle-class tax cut would become a working people’s tax hike during the next decade.

The House bill is different, but it still would redistribute wealthy to the already rich on an appalling scale. The richest 1 percent would receive 31 percent of the tax cut in the first year of the plan, and by the 2027, their share would grow to 48 percent for an average of more than $64,000 for the richest households. Meanwhile, the bottom 99 percent of taxpayers would receive a diminishing share of tax cuts. Furthermore, one in four households would face a tax hike during the later years of the House plan, with middle- and upper-middle-income families most likely to face a tax hike.

House Speaker Paul Ryan’s is correct when he talks about working people’s economic anxiety. But his proposed remedy—hijacking our tax system for the benefit of his most well-heeled and influential corporate constituents—reinforces the belief that our elected officials are in Washington to serve wealthy elites rather than the rest of us. During moments of candor, they admit as much.

Treasury Secretary Steve Mnuchin and White House economic advisor Gary Cohn both conceded earlier this year that some middle-class families would pay more. And Cohn later said that corporate CEOs are “most excited about the plan.” More than one lawmaker has said he is feeling pressure from “donors” to pass this plan. This is why, so far, no amount of public outcry has stopped this inferno from moving forward. Lawmakers have donors and corporate CEOs to placate.

You’d have to subscribe to the bizarre, Orwellian theory that middle-income people’s economic anxiety will somehow be assuaged by watching the rich grow richer to believe that this plan is good for working families. But we’re not too far down the rabbit hole. Principled lawmakers can heed the calls of their constituents and vote, “no.” Using the tax code to redistribute wealth to the already wealthy should not be a sword that Congress wants to fall on.



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