Congressman Lance said “there is a lot I agree with in the tax reform outline [announced today]. Lower individual rates on middle-class families and a competitive corporate rate will unleash tremendous economic growth and job creation”.Let’s look a little harder at what we know from the White House 9-page tax proposal.
Well, we know that the proposed tax cut will be huge - $5.5 trillion according to the Committee for a Responsible Federal Budget How that will be paid for is vague, but the administration says it would eliminate most personal tax breaks, which would still leave $2 trillion unpaid for. Since the state and local tax deduction, worth $1.3 trillion , is being fiercely defended by many Republicans, including Congressman Lance, we can probably assume it will survive, meaning the unfunded portion of the tax cut could amount to more than $3 trillion. The stated objective is to stimulate so much additional growth that the cuts will pay for themselves, but as the Committee for a Responsible Federal Budget points out “the country would need roughly 4.5% sustained growth to pay for the entire tax plan – two-and-a-half times the 1.8 percent that CBO projects to occur over the next decade”. The last time we saw that number was in the 1960’s - when, as Bill Gates pointed out, the highest marginal tax rates were greater than 90%! Put another way, those high marginal rates were no deterrence to growth back then.
Furthermore, although the proposal is billed by the White House (and Congressman Lance) as a boon to middle class taxpayers, the non-partisan Tax Policy Center asserts that the majority of the benefit will flow to corporations and the wealthiest members of our society. The likely result will be threefold. A massive increase in our debt (up to 111% of GDP per the Committee for a Responsible Federal Budget); huge downward pressure on entitlement spending, which has to include Social Security and Medicare; and an ever-greater increase in income inequality in our society. As the IMF recently pointed out in its most recent half-yearly fiscal monitor, there is no evidence that cutting taxes on the top 1% is necessary to stimulate growth; nor, indeed, that growth would suffer by increasing taxes on the wealthy. See Bill Gate’s comment…
We should certainly ask how to make our tax system more efficient, and we need to question whether as taxpayers we are getting the best bang for our tax buck. But as our population ages and our tax base shrinks, unfunded tax cuts for corporations and their wealthiest shareholders are not going to help us rebuild infrastructure or help our citizens who are being left behind in the gig economy.