Emily Kowalik ‘18
Opinions Editor
The Republicans promised us a tax reform that would simplify the code without adding to the nation’s deficit. They began with this argument: they promised to lower tax rates, particularly on corporations while ending tax breaks and loopholes at the same time.
By default, the decreasing tax rates on corporation and anti-corruption measures would balance one another. The result would be a clean and more efficient code that would raise just as much revenue. However, the bill that House Republicans released last Thursday betrays that promise.
The Republican’s proposal phases out the estate tax, which benefits few but the wealthy. This will cost $172 billion in tax revenue. The bill also repeals the Alternative Minimum Tax, originally created to ensure the richest tax filers pay at least some tax, which will cost $696 billion.
The GOP plan also cuts out the corporate tax rate and slashes rates on “pass-through” businesses, costing the treasury $448 billion over 10 years.
But the corporate tax rate cut makes no sense. The current argument for corporate tax cuts is déjà vu for those familiar with “trickle-down” economics.
In 1981, President Ronald Reagan’s director of the Office of Management and Budget, David Stockman, argued the Kemp-Roth tax reform bill was just a “Trojan horse” to lower tax rates on the wealthy in what he mockingly labeled as a “trickle-down” theory.
When those tax cuts fail to deliver the promised investment explosion, what we are left with is simply higher deficits.
The economy is already growing and tax cuts for corporations are not needed to stimulate our economy. Despite all the trickle-down propaganda being peddled by the Republican Party, no one believes corporate tax cuts are being proposed to boost growth.
About three-quarters of Americans, and more than half of Republicans, think the wealthy and big corporations pay too little in taxes, according to a September Associated Press-NORC poll. Yet, Republicans in the House claim that the U.S. corporate tax rate is too high and that the cut will encourage corporations to shift investments back to the U.S.
While the rate might, at first look to be high at 39 percent relative to Germany’s 30 percent and the UK’s 24 percent, according to the Congressional Budget office’s recent study, our effective tax rate is actually much lower that the statutory rate and is around 18.6 percent, essentially equal to the UK 18.7 percent and not far above Germany’s 15.5 percent.
The Republicans’ tax plan is expected to cost about $2.4 trillion over the coming decade, according to a preliminary analysis by the nonpartisan Tax Policy Center.
The tax reform being proposed by Republicans is being labeled as a “middle-class con job.” If the nation were in the midst of a recession, Republicans would have an argument for a deficit-financed stimulus.
But the economy is growing and does not need a short-term boost. In fact, with the economy expanding, this should be the time to reduce the nation’s already alarmingly high debt. After all, that is what Republicans passionately supported when they were the minority.
Our nation cannot afford to add to the deficit. We simply cannot afford to further enrich the 1 percent at our expense.
The nation needs tax reform, but if the reform proposal is this baseless, we would be better off with no change.
