“Tax” Is Not A Four-Letter Word

As Congress takes up consideration of what the President and GOP have labeled “tax reform,” and what impartial observers describe as tax cuts mostly for the wealthy, it’s time for a re-run of my rant on the subject of taxation.

I’ve been particularly incensed by the appearance in Indiana of a TV spot aimed at Senator Joe Donnelly. Donnelly is a Democrat (moderate, of the Hoosier variety) considered vulnerable in 2018. The spot features a lovely young woman talking about the importance of tax reform–no specifics, no definitions, just a plea to Donnelly to support “fair” taxation.

I’m all for fair taxation, and I’m willing to bet everyone reading this is, too. I’m also willing to bet that definitions of a “fair” tax system vary widely (the devil, as we all know, being in the details). The one thing we should all recognize, however–whatever our personal opinions about “fairness”–is the difference between tax reform and tax cuts. 

As Jared Bernstein recently wrote in an article in the American Prospect,

In D.C. tax-debate parlance, “tax reform” means something specific: cutting tax rates and broadening the tax base. Rate reductions lose revenue, but you make it up by closing loopholes, exemptions, and favorable treatments of one type of income over another, thus broadening the income upon which taxes are levied.

As Bernstein points out (and we all know), most loopholes are the result of lobbying by special interests, not some disinterested analysis of their utility, making them very hard to eliminate. Even more pernicious is the belief–an article of faith in the GOP–that lower rates will generate more economic activity and thus more tax revenue. There is absolutely no evidence supporting this theory, and considerable evidence rebutting it, but it refuses to die.

In the current tax debate—no surprise—the Trump administration and the Republican Congress are predicting that their tax cuts will return large growth effects. They claim their plan—and to be clear, there is, as of yet, no plan—will increase the real GDP growth rate by at least half, from around 2 percent to 3 percent or 4 percent, and that this increase will offset much of the costs of the cuts.

This was the same story told by Reagan, Bush I, and Bush II, and in every case the results belied the claims. The most recent example, from the state of Kansas, is particularly germane to this discussion, because it reveals flaws in the same ideas being bandied about by the current Congress.

Tax policy experts estimate that the measures being discussed would cost government $6.5 trillion in revenues over ten years, and dramatically increase the deficit the GOP pretends to care about.

The vast majority of the benefits of these measures accrue to the wealthiest households: Almost 50 percent of the cuts go to the top 1 percent, while 6 percent go to the middle fifth. About 27 percent of the gains go to the 120,000 families in the top tenth of the top 1 percent, whose average pretax income is $11 million.

If anything remotely like this package passes, it will exacerbate levels of inequality that already exceed those of the Gilded Age.

According to the Brookings Institute,

this tax reform plan gives a lift to growing inequality, and signals that the GOP is okay with persistent poverty and with the inability of one-third of us to feed our kids. It’s time to ask ourselves, how do we craft tax reform for the long term—reform that tackles American poverty and inequality and creates the conditions for inclusive economic growth?

I would suggest that genuine tax reform begins with the recognition that “tax” is not a four-letter word. Taxes are the dues we pay for social peace and stability, for the myriad of services that modern societies require and their citizens demand, and from which we all benefit.

We currently have a system that incentivizes the “haves” to evade their responsibility to pay a fair share, or even to discuss what a fair share would look like. Until we have that conversation, we may see tax cuts–mostly for the already privileged– but we won’t see anything resembling genuine tax reform.

 

 

20 thoughts on ““Tax” Is Not A Four-Letter Word

  1. The TV spot in support of tax reform is paid for by Americans for Prosperity – a dark money organization representing the interests of the already wealthy – so when the actor tells us that the reform is not for the well-off, she’s reading the lie that is contained in the script. The loopholes they promise to close are going to be defended to the death by those who paid lobbyists for them.

    In his news conference on Monday, Trump demonstrated (again) that he has only a tenuous acquaintance with the truth, has a hard time remembering which lie to tell and can always fall back on “I was told”. If this guy is selling the tax reform, you can guarantee it will have little impact for anyone but him and others in his economic group.

  2. Any and everything about taxation, be it “tax reform” or “tax cuts”, is confusing to the general public. At present it is so scrambled by the GOP (Greedy Old Party), I doubt they fully understand it themselves but hope they can push it through Congress and hope they will be among those paying lower taxes.

    If; as Trump’s minions keep telling us, cutting taxes for the wealthy will result in more jobs and a higher employment rate (where have we heard this before?), which means more people will be spending more money which will, in turn, increase the GDP…did I get that right – er, correct? If this is the way it works why didn’t Bush II’s tax cuts for the wealthy immediately go into effect, bringing about that promised “trickle down” benefit? Isn’t the increase, or no increase, in Social Security benefits based on GDP? So why did we get no increase for three years and why last year did I get a $2.00 per month SS increase with a $6.10 increase in my Medicare deduction, resulting in an actual $4 cut in my monthly Social Security check?

    If Trump and his GOP get their way; we who depend on Social Security monthly, should expect a sizable increase allowing us to spend more for goods and services which will, in turn, increase the future GDP resulting in another sizable increase in following years. Right? Er, correct?

    Back to W.C. Fields’ quote; “If you can’t dazzle them with brilliance, baffle them with bullshit.” Or; “alternative facts” as it is now termed. “Tax” is not a four-letter word; nor is Trump; why are we still asking to see Trump’s tax records and not taking legal action as would be and IS DONE on members of the general public to force he and his family to produce years of tax documents?

    “In D.C. tax-debate parlance, “tax reform” means something specific: cutting tax rates and broadening the tax base. Rate reductions lose revenue, but you make it up by closing loopholes, exemptions, and favorable treatments of one type of income over another, thus broadening the income upon which taxes are levied.”

  3. The greed of the wealthy is mind-numbing. If you have so much money that you feel the need to hide millions of dollars in off-shore accounts to just sit there, then that is the height of greed.

    People who are lucky enough to be able to save a little for retirement can consider themselves among the few. Most of the population struggles daily just to exist. Saving for retirement is not a goal when you must worry about paying the bills to survive.

    The ultra greedy class at the top has insulated themselves from the rest of the population so well that they believe they are truly entitled to their life of luxury. They believe that their value as human beings far exceeds those with less money. So far, this belief seems to be serving them very well.

  4. Americans for Prosperity – the group financing those ads on Joe Donnelly – is the group financed by the Koch Brothers who fiercely oppose any environmental legislation that might cause these multi-billionaires to be held accountable for their oil spills, pipeline breaks that poison ground water, oil fields and chemical plants that foul the air, AND taxation that might help clean up the pollution they cause.

    The TV ads make it sound as if middle class families will be the big beneficiaries of the tax reforms promised, but they are misleading to obscure Sheila’s analysis which is exactly on the mark. The richest 1% of our nation would gain half of all the tax cuts.

    The economy is a lot more likely to benefit if all the tax cuts are concentrated among the poor and lower middle class because they HAVE to spend that money in the economy to pay rent, buy the kids school clothes and shoes, buy groceries, and other necessities. They don’t have the luxury of not spending it because they live paycheck to paycheck.

    Sheila is right – trickle down economics hasn’t worked. Let’s try trickle up instead.

  5. Hidden behind the scenes of “tax reform” is the trillions hidden in off-shore accounts and trillions more of accumulated corporate profits held in foreign countries.

    The popular theory of “trickle-down” economics has also been endorsed by Democratic presidents like Barack Obama and Bill Clinton. It’s all part of Neoliberalism which started in the Reagan/Thatcher years. It’s the cause of our new Gilded Age and mass inequality.

    Lloyd Blankfein, CEO of Goldman Sachs (The Vampire Squid), has been using Twitter this year. He Tweeted this fascinating comment several days ago:

    “At IMF in DC. Puzzling that politics everywhere are so difficult when world’s economies are (mostly) good and the world is (mostly) at peace”

    If your salary places you in the .1%, the world is all champagne and rainbows. If you’re part of the Hoosier working class, your household income is stuck in the 90’s thanks to “trickle-down” economics and NAFTA meant to allow corporations to avert unionized labor.

    Financial and political leaders didn’t prepare a plan for the working class left behind. Robotics and technology have done wonders for productivity gains, but guess where all those gains are going?

    Tax reform is a propaganda campaign. Neither political party cares about the working class.

    Joe Donnelly is vulnerable because he consistently votes against the working classes because he’s manipulated by the Donor Class. His family business outsourced jobs to Mexico so I’m sure the hard right opponents and outside money will nail him good. He’s toast.

    Joe symbolizes the dying Democratic Party…expect more losses.

  6. The Republicans have already started planning to lower the debt while cutting taxes for their friends. Their new budget takes a chunk from Medicaid and Medicare. The idea is to starve the beast. In this case, the beast is government programs that help the poor.

    If we had evidenced based government, we would be raising the minimum wage and leaving taxes right where they are.

  7. Taxes are the price we pay for civilized society, and tribute is hardly new, predating Roman times. The issue is who pays how much and when. Never have we been weaker in collecting taxes what with offshore accounts, credits and deductions for the superrich beyond reason, weakened IRS budgets, and Koch and Mercer-financed lying on TV to soften up the masses for the next political theft from the rest of us. Judge Learned Hand referred to taxes as “exactions” but he did not say that the superrich should be exempted via legislative fiat from paying their fair share of such exactions. I have studied economic growth for some time and can tell you this – that having the superrich pay less taxes is not related to economic growth. Such growth comes throught the final arbiter of true growth. It’s called aggregate demand, and with further debt (plus its servicing as interest rates go up), expect demand to crater. I say that giving away another slice of our economic pie (per Joseph Stiglitz) reduces demand and is more likely to signal recession than economic growth. The proposed policy of yet further tax reductions for those who don’t need it and are already not paying their fair share could hardly be more wrong.

  8. We need to keep in mind that the top 1% are not the only driving force behind the tax “reform” plans. There is that large section of wealthy Americans who vote Republican, turn a deaf ear to the pleas of the poor, live in suburbia, have great material wealth and like to spend it. This group believes that enough is not enough; that they actually are entitled to their wealth (the inheritors, the schemers, the cheaters, the selfish), and any cut to their incomes is tantamount to an attack on America itself.

    The root of all the evil in this country is “GREED”.

  9. Nancy; granted, the wealthy live much better than the rest of us but years ago I read a statement by some wealthy American who said, “No matter how much money your have; a bed can only be so comfortable and a steak can only taste so good.” I often wonder if those with millions – or billions – realizes that they can buy things they don’t need and never use, they never even see all of that money. How much pleasure can they get reading astronomically high numbers on reams of paper? I appreciate what money I have for what I can do with it to help myself or others; not read about it.

    A portion of our taxes goes to pay for those we elect to protect us; they are currently at a standstill, refusing to protect us from themselves. There is a four-letter word to describe what Trump and Congress is doing to us…and that word can be translated to “tax us”.

  10. My attitude about tax breaks for the wealthy and the phantom trickle down claim would much improve if I knew that increased profits for the wealthy would do its trickling down in Indianapolis, Columbus, Philadelphia, Denver, etc., instead of China, South Korea and Mexico.

  11. If the donor-class were treated with the same contempt by the politicians from both parties the same way ordinary folks dependant on Social Security have been treated…..

    Thumbs up on the comment from T Smekens.

    The donor-class doesn’t want to pay decent wages or any taxes at all. This IS a war against the rest of us by the monied interests that own our government. The suits won years ago and they did it with the help of both political party organizations. Donnelly epitomizes what is wrong with Democrat politicians.

  12. THERE MUST BE DISTANCE!

    The filthy wealthy do not really measure their wealth in money; they measure it in OBVIOUS DISTANCE–the obvious distance between them and the rest of us, a measure they can make more obvious not only by making more money but by making us make less money.

    It does their ego no good to own a 400 thousand-dollar yacht when they know that the average person can’t really tell the difference between their yacht and you or me (of the middle class) sailing a 50 thousand-dollar sailboat at sunset. In that way, a successful middle class is a problem to the wealthy; there is simply not enough OBVIOUS DISTANCE between them and us.

    For the wealthy, it is a disgrace that a middle class person can wear a suit or a gown that to millions of people is little different than the suit or gown the wealthy wear.

    It would gall the wealthy to know that I have eaten caviar, gall them enough that they will take measures to insure it never happens again.

  13. Americans for Prosperity, brought to all of us by the usual rancid suspects, disingenuous to the end. I wonder how much those voice actors are paid to lie through their teeth? I can’t help but also wonder how close they are located to ALEC’s headquarters geographically in northern Virginia.

    Americans for Prosperity
    Nonprofit organization

    americansforprosperity.org
    Americans for Prosperity, founded in 2004, is a conservative political advocacy group in the United States funded by David H. Koch and Charles Koch.

    Headquarters: Virginia
    Tax ID no.: 75-3148958
    President: Tim Phillips
    Membership: 2.3 million (2013)
    Founded: March 10, 2004
    Founders: David Koch, Karl Rove

    Doesn’t it give you a great feeling knowing that these “people” are always thinking about us and taking away our welfare? Not!!!!

  14. We hear a lot about the Dow Jones Industrial Average DJIA or Dow) and Standard and Poors 500 (S&P 500). These are stock market indexes. When these indexes go up over time – it called a Bull Market (Happy Face), when they go down over time it is called a Bear Market (Sad Face).
    The McMega-Media regularly plugs or peddles these indexes as a barometer of economic health. It is in a way but how much do they touch everyone.

    We can also look at Median Household Income over time to determine the economic health of the nation. It should be noted there is important difference between “Median” Income and “Average or Mean” Income.

    For a more complete explanation see http://www.purplemath.com/modules/meanmode.htm

    Back in 1967 the Median Household Income was $6,155. The DJIA was 879.12 and the S&P 500 was 95.40.

    Back in 2016 the Median Household Income was $59,037. The DJIA was 19,762.60 and S&P 500 was 2,275.12.

    Since 1967 Median Household Income has went up 9.59 times ($59,039 divided by $6,155).
    Since 1967 the DJIA has went up 22.48 times (19,762.60 divided by 879.12). The Standard & Poors has went up 23.85 times (2,275.12 divided by 95.40).

    If the Median Household Income of 1967 ($6,155) had kept pace with the increases in the DJIA (22.48), Median Household Income would be $138,364 ($6,155 times 22.48). If the Median Household Income of 1967 ($6,155) had kept pace with the increases in S&P 500 (23.85), Median Household Income would be $146,797 ($6,155 times 23.85).

    It is obvious that the Median Household Income since 1967 has not kept pace with either the DJIA or the Standard & Poors 500. The idea of a rising tide lifting all the boats is bogus.

    As far as Trump’s Tax Plan, the Trumpet probably looked at his own secret tax returns and decided which taxes he did not want to pay and presented his plan accordingly on a napkin.

  15. The Republican Party has always lied about taxes and regulations being the bane of capitalism. The terrible economist, Milton Friedman took capitalism to the brink of fulfilling Marx’s prediction about how capitalism would fail. This is where “supply-side” or “trickle-down” economics comes from. Before Friedman (60s-70s), the Republicans were all about free-markets (no regulations on goods and services) solving all problems (Coolidge, Hoover). None of this EVER worked for ANYBODY in ANY country or state. When capital gets funneled to the richest, it stays there.

    Why this simple fact isn’t publicized over and over and more loudly than ever by Democrats everywhere is beyond my understanding. This realization, coupled with the promotion of Keynesian economics, the practice that saved capitalism, in the 1930s, from collapse has got to be the first line in any and every Democratic candidate’s communication to the voter. If it isn’t, the same corrupt clowns will keep getting elected until our economy DOES collapse and makes Marx the great seer of all economics.

  16. The 1% get 79% of the 2.4 trillion in taxcuts. The only trickle down associated with massive cuts for the wealthy is the trickle down to heirs until the inheritance tax gets abolished. Then that trickle becomes a flood of untaxed wealth for the wealthy.

    Drumpf also wants to repatriate trillions of bucks in offshore accounts at a minute 5% rate, instead of the 35% rate it should be taxed at. Again, another benefit for those who don’t need givernment largesse to prosper.

  17. Nancy Papas, it’s actually much worse. The Koch Bros. and their political arm AFP are not simply acting in their business self-interests, although it’s not to be dismissed.

    They are self-professed libertarians and at the core of their beliefs is that all federal taxation is THEFT, if it above and beyond that needed to provide for the defense of the country and operate the departments of State and Justice. And they have a LOT of advocates, including many of our own state legislators in Indiana.

    Moreover, they also subscribe to the notion (actually another article of faith) that TOO MUCH democracy is a bad thing. By that is meant a number of things but two come to mind:
    1) some people’s votes should be worth more than others and,
    2) public office would be best left to a plutocracy made of people of means who have the education, world-view, and economic resources that make them uniquely qualified to run our communities, states and federal government.

    The last part of this is really a throwback to the early constitution (and those of the early states) where voting (and office-holding) was limited to white male property-owners, and only after decades, a wrenching, civil war and decades more of various groups seeking equal treatment under the law, we have this dangerous dark force trying not only stop the American Experiment , but roll it back to a time that is regarded as many as the halcyon days of being an American.

    The fault in their logic (if you can call it that) is that it has ALWAYS BEEN an advantageous time to be a rich white male in America. They don’t need more advantages. We need more of our citizens to catch up.

  18. Patrick – Excellent thumbnail sketch of recent history. Thanks! Systems of government change within themselves. Jefferson and Madison were ahead of their time but behind ours. I remember reading an excerpt from voting member of the then times who asked, rhetorically, why those without real estate would want to vote, having no skin in the game, so to speak. That question made some sense when government’s role was limited, but with the expansion of government in different roles since, it is a joke today. Unfortunately, libertarians and right wing Republicans want to go back to a time in some sort of pre-Jeffersonian and Madisonian day when we first stepped out of the cave and into the light of day, pre-dating even Madison and Jefferson.

  19. the problem is, most americans dont make enough,to make a so called tax break mean anything, the issue is, wages, flat for 30 years,and no one seems to make this a point, the tax base is garbage to support any civil needs,much less education and the such. if the question remains why health care is so expensivem try asking why,we cant afford it.. wall street has, with our elected,bought and paid for politicians,who ever they are,have total control now with the head troll. any econmics professor will tell you, if the cost of living,and wages remained steady since 1975, we would be alot better off. instead wall street has all the power to funnel money to investors and banks, while we, work for them. this discussion on taxes means nothing to the middle class, single,or without childresn at home. few of us have any savings,and many lost all they had in 2008 fall out. tax cuts here are for one reason, the same as reagans,for the rich, for wall streets greed and banks. if you want to see meaningful gains, tax wall street, and refund the civil sector with that money. raise the wages, @2.9% growth this year is a joke. the fact, any working person who has any sense of this ongoing scam, will say, im sick and tired of people who work on wall streets greed, making money off my back. its time we see that money go into the people who do the work.those who sit around and dream what they will do with my sweat, can take a long walk off a short pier. this scam is nothing more but economic slavery on the working class. get it right. its the wages, no the F,,,,,,, taxes.

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