The Rich Get Richer Still

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The Rich Get Richer Still

The Trump Tax Plan is Plunder, Plain and Simple.

"It is virtually impossible to find a reputable economist who supports this plan," writes Koechlin. (Photo: Michael Fleshman/Flickr/cc)

The Trump tax proposal is appalling (if utterly unsurprising).  It is immoral and it is bad economic policy.  It will make the rich richer, and it will not promote economic growth.  This tax plan is, in its essence, a further redistribution of income from the middle class and the poor to the very rich.  It’s plunder, plain and simple.

Ha Joon Chang, author of 23 Things They Don't Tell You About Capitalism, hits this nail on the head: "Once you realize that trickle-down economics does not work, you will see the excessive tax cuts for the rich as what they are—a simple upward redistribution of income, rather than a way to make all of us richer, as we were told."

"Plunder, plain and simple."

The Tax Policy Center estimates that the Trump tax plan would reduce taxes (and thus federal government revenue) by $2.4 trillion over the next ten years.  In 2027, 80% of the tax cut would go to the top one percent.  The one percent (with an average income of $1.4 million per year) would enjoy an average annual tax reduction of $207,000 per household per year.   Those in the top 0.1 percent (with an average annual income of about $28 million) would, on average, enjoy a tax cut of one million dollars per year.    

The repeal of the estate tax, one particularly appalling provision of this tax plan, would return $240 billion dollars to taxpayers – all of it to rich taxpayers.  Under the current tax code, 99.8% of estates (those under $5.98 million) already pay no federal estate tax.  And so the elimination of the estate tax will affect only the richest 0.2% of estates.   The big winners will include Paris Hilton, Jared Kushner, and Eric Trump.

The Trump tax plan also includes a dizzying array of corporate tax cuts.  Corporate profits are soaring, the effective rate of taxation of US corporations has fallen by about a third in recent decades, and US corporations are sitting on enormous stocks of cash. There are many things wrong with the US economy.  Low corporate profits and a shortage of investment capital are not among them. This is, rather, another give-away to big capital. State assisted plunder.

We can expect the GOP to continue to pursue cuts in spending on education, environmental protection, Social Security, Medicare and Medicaid, and infrastructure because, you know, “we can’t afford it.”  The Trump tax cuts would facilitate a fake fiscal crisis and thus, very likely, higher costs (property taxes, sales taxes, tuition and more) and fewer services for the 99%. 

The United States is already, by far, the most unequal of the world’s rich countries, and for decades it’s been getting worse.  In 1979, the top 1 percent captured about 9 percent of all income; in 2016, they pocketed 22 percent. The incomes of the top 0.1 percent have grown even faster. Meanwhile, the incomes of the shrinking middle class have stagnated, and the incomes of those with a high school education or less have fallen substantially. The purchasing power of the federal minimum wage is 15 percent lower than in 1979, despite a doubling of labor productivity.  In the meanwhile, CEO pay has soared. In 1965, the typical CEO earned 20 times as much as the average production worker.  In 2015, they earned 300 times more.  One in five kids in the US lives in poverty.  And the US is the only rich country in the world without universal healthcare.

And while much has been made of the (very real) hard times endured by the “white working class” in recent decades, profound racial inequality remains an essential feature of the US economy.  The income of the median African American household is about 60% that of the median white household. The wealth of the median African American household is one thirteenth that of the median white household. 24% of African Americans live in poverty—nearly three times the rate for whites—and a third of African American children live in poverty. This racial inequality manifests itself in other realms of social life as well: education, health care, housing, employment, capital markets, the criminal justice system, exposure to toxins, and more.

Despite this grim reality, the Republican Party’s economic policy agenda has not changed for decades.  Cut taxes for the 1 percent. Reduce corporate accountability (“deregulate”)—so that banks can run wild and corporations can pollute with impunity.  Undermine the bargaining power of workers. And then blame the inevitable decline in workers’ incomes on people of color—"illegal immigrants," "welfare queens," food stamp recipients, and those who’ve “cut the line” thanks to "quotas" and "special preferences." In reality, the lost income of workers of all sorts—union and non-union, black and white, male and female, public sector and private sector—can be found in the pockets of the 1 percent.

Defenders of this tired agenda insist that the economy will grow if we provide a better "business climate"—lower taxes and fewer regulations will liberate corporations to create jobs. The problem is that it doesn't work.  It’s Randian nonsense. Decades of lower taxes and reckless deregulation have saddled us with slow growth, soaring inequality, the financial meltdown of 2008, a devastating recession, rising tuition at our public universities, and diminishing opportunities for millions of Americans. And yet—like a zombie that will not die and despite its long record of failure—trickle-down economics is alive and well.  

It is virtually impossible to find a reputable economist who supports this plan.  Its defenders include a parade of opportunists and ideological hacks, many of them employed by Fox News and/or backed by Koch-funded think tanks.  Other defenders include Trump, his economic adviser Gary Cohn and Treasury Secretary Steve Mnuchen (each a billionaire), a few Wall Street economists, and—oh yeah!—the entire Republican Party, dutifully and mendaciously advancing the interests of its billionaire/corporate patrons.  

This tax plan provides benefits to a tiny proportion of the Americans – those who are least in need and have, for 40 years, been grabbing a larger and larger slice of the economic pie.  This is not about economic growth, or shared prosperity.  It is about big capital and the richest of the rich grabbing an even bigger slice of the pie.  It is plunder, plain and simple. 

Tim Koechlin

Tim Koechlin

Tim Koechlin holds a PhD in economics. He is the Director of the International Studies Program at Vassar College, where he has an appointment in International Studies and Urban Studies. Professor Koechlin has taught and written about a variety of subjects including economic, political and racial inequality; globalization; macroeconomic policy, and urban political economy.

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