Trump’s top economic advisor Larry Kudlow has hinted that another supposed middle-class tax cut may be in the works, a “Tax Cut 2.0” to be delivered—Surprise! Surprise!—in time for the 2020 election season, an bare naked ploy to try to convince average Americans he really cares about and their economic interests.
As the saying goes, “Buyer beware!”
Or, as George W. Bush famously put it, “Fool me once, shame on—shame on you. Fool me—you can’t get fooled again.”
Remember the Tax Cuts and Job Act of 2017? While most Americans did, it turns out, very likely receive some tax benefit, they didn’t even feel its effect for the most part. Why? Well, 60 percent of the total savings of the legislation went to the top 20 percent of earners, while the top 1 percent were gifted 17 percent of all the tax cut dollars. These numbers don’t even account for the enormous dollars dropped on corporations when their tax rate was slashed from 35 to 21 percent, a cut that further benefited the very wealthy disproportionately since they own the most stock.
What was left? The middle fifth of income earners paid about $780 less in taxes, less than $70 per month, and an even smaller and not-so-noticeable amount per paycheck.
Was there a larger benefit, though? Did the tax cut lead, as promised, to economic growth?
The short answer: Nope.
In fact, the United States lost more tax revenue than any other nation in the Organisation for Economic Co-operation and Development, as the nation’s tax-to-GDP ratio fell 2.5 percent from 2017 to 2018.
These tax cuts benefited the wealthy and did not trickle down, despite Trump’s promises that companies would invest in workers and not cut jobs. Companies like AT&T, Wells Fargo, and General Motors lobbied for them, promising to re-invest their tax savings in their workers and companies to the benefit off the nation as a whole. And yet all of these companies have engaged in massive layoffs or plant closings. AT&T has eliminated over 23,000 jobs since the tax cuts went into effect, despite receiving a $21 billion windfall from the tax cuts with the prospect of cashing in an additional $3 billion annually in tax savings. In November 2018, GM announced it would be closing five plants, eliminating 14,000 jobs in communities across Ohio, Maryland, Michigan, and Ontario, Canada, while buying back $10 billion in stock and earning a net profit of $8 billion on which the company paid no federal tax. Wells Fargo did raise the minimum wage of its employees, though the tax savings for the company were 47 times larger than the cost of that pay raise to the company; and the company announced its plans in September 2018 to eliminate 26,000 jobs, at the same time that it has raised health insurance costs for its employees.
Reducing the corporate tax rate from 35 to 21 percent and saving corporations some $13 billion in taxes was supposedly to spur economic growth, create more jobs, and induce companies to raise wages. While Treasury Secretary Steve Mnuchin trumpeted that 90 percent of working adults would experience an increase in pay tied directly to the tax cuts, in fact only 4.3 percent of workers in Fortune 500 companies have received either a one-time bonus or an increase in wages. Businesses have reaped nine times more in tax cuts than what they have passed on to workers.
So, is this latest tax cut scheme an honest bid to really bestow a meaningful tax cut on the middle class and not use the rhetoric of tax cuts as a distraction, a sleight-of-hand, while resources are diverted to the wealthiest among us?
Well, remember what Bush said—“you can’t get fooled again.”
The whispers thus far about this rumored “Tax Cut 2.0” suggest the plan is to reduce the 22 percent marginal tax rate to 15 percent.
According to reporting by CNBC’s Sarah O’Brien, Daniel Bunn, director of global projects for the Tax Foundation, an independent tax policy research group, concluded, “That actually wouldn’t do much of anything to cut taxes for the middle class.”
What would help most Americans? Actually building up the nation’s tax base, as lost tax revenues and ballooning deficits finally translate into cuts to services and infrastructure upon which we have come to depend, such as our public schools and universities, our healthcare, our roads, our energy grids, our water supplies, and so forth.
And studies show that Americans are more interested in policy that require all Americans and corporations to contribute their fair share in taxes than they are in receiving tax cuts.
Disinvestment in vital services, institutions, and infrastructure ends up costing taxpayers more in the short and long terms, and we receive less for our tax dollars when increasing portions of those dollars go to service debt.
Trump’s Tax Cut 2.0, should it come to fruition, would be a ploy to get himself re-elected so he can avail himself of the office for another four years of enriching himself as the expense of the American people.