The Right Vision for Remaking Our Economy Does Not Include Tax Cuts for the Rich

Last summer, the Trump administration put forth more ideas for top-heavy tax cuts, even as polling showed people across the political spectrum favored higher taxes on the rich and corporations overall, and a wealth tax in particular.

Now, as the country confronts the worst economic downturn since the Great Depression, the White House vision for the future is even more out of touch with what the country needs and wants. People in our communities are rightly demanding reforms that get us through this crisis and remake our economy to be better than it was before - more equitable, more inclusive, more prepared for climate and health catastrophes. 

Yet, the Trump administration is floating the same timeworn tax cuts, not because they'd help in a pandemic and a recession - they won't - but because they are part of an old playbook. The president's proposals would increase inequality, reduce public revenue, and do little to relieve soaring need.

We can do better. At least part of the answer lies in the bill that House Speaker Nancy Pelosi introduced on Tuesday, the Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act. The bill is not perfect. But it includes much-needed policies that assist laid-off and essential workers, fund clobbered state and local governments, and shore up the health care system. It offers a stark contrast to the chaotic and inequality-increasing ideas we've heard from the White House

"When policymakers haven't ensured that people working in hospitals and grocery stores have the protection they need to prevent illness, they shouldn't be promoting top-heavy tax cuts."

Sen. Mitch McConnell, who called the bill "a liberal wish list" and President Trump instead want more of what they've always pursued - tax cuts to the wealthiest. Just after the Coronavirus Aid Relief and Economic Security (CARES) Act passed, the president suggested expanding tax deductions for corporate spending on meals, sporting events and entertainment, even as his administration fought food aid for hungry families. Letting CEOs deduct pricy dinners won't revive restaurants in a pandemic, but corporate lobbyists would benefit from weakening the provision in the 2017 Tax Cuts and Jobs Act that made such expenses harder to write off.  

Also on the menu: reducing taxes on already undertaxed capital gains. More than three-quarters of the windfall from the low tax rates for capital gains go to the richest 1 percent. Enacting more tax breaks for capital gains would further line the pockets of the well-heeled and do nothing to help those most hurt (who pay a higher rate on their wage earnings). When policymakers haven't ensured that people working in hospitals and grocery stores have the protection they need to prevent illness, they shouldn't be promoting top-heavy tax cuts.

The White House is also pushing other goodies for corporate donors, like permanently allowing businesses to "expense," or immediately deduct the full cost of equipment. The 2017 tax law's provision allowing expensing expires in 2022. But Trump intends to use this moment to make the provision permanent, even though it likely rewards businesses for investments they would have made anyway. These won't help our neighbors who have been laid off, have gotten sick or are performing hazardous jobs.

The main element that Trump touts and tweets, a payroll tax cut, is also wrong-headed. In March, my organization, the Institute on Taxation and Economic Policy, estimated that more than 65 percent of the benefits of a payroll tax cut would flow to the richest fifth of workers. Now that it's clear where job losses are concentrated, the disparity would be even worse. Employers axed more than 30 percent of the lowest-earning fifth of workers but only 5.5 percent of positions held by richest fifth. The 33 million workers and counting who've filed unemployment claims since mid-March get nothing from this provision because they're no longer on a payroll.

These tax cut ideas come on top of controversial aid for airlines and tax breaks for millionaire business owners in the first two COVID response bills.

People are getting sick and losing jobs in every corner of this country. So the same-old trickle-down, tax-cut agenda that drowns government in a bathtub won't get us out of this.

But we the people are supposed to be in charge of this democracy. And we can say no to using a public health crisis to ram through tax breaks mostly meant for those who need them least. We can also refuse to accept worse outcomes in the richest country on the planet when many other places are managing this catastrophe with less illness, death and unemployment.  

Progressives should demand some modifications to the HEROES Act--removing an expensive repeal of the cap on state and local tax deductions that would mostly go to wealthy filers and demanding better accountability as researchers from unions and government oversight groups recently outlined. But the bill is right to direct resources at the necessary scale to states, cities and struggling families.

By funding state and local government to deliver health care and education, providing laid-off workers financial support and a clear pathway back to their jobs, and delivering a real public health response, we can remake the country with an approach to taxes, jobs, and public problems that actually prepares us for the next disaster.