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Leo W Gerard: Republican Tax Plan — Make America Grieve Again

A giant sucking sound, louder than a freight train, noisier than a tornado, shriller than Ross Perot yelling, “I told you so,” blasted across the nation Thursday as Republicans in the U.S. House passed their tax plan.

It was the terrible sound of jobs swept out of this country. When Perot ran for president, he said the North American Free Trade Agreement (NAFTA) would siphon off American jobs. And he was right. It did.

PHOTO BY STEVE DIETZ, UNIONPIX.COM

But this is much, much bigger.

House Republicans approved a scam exempting corporations from all taxes on their foreign operations. Under the GOP proposal, corporations like Carrier and Rexnord can benefit from protections provided by American patents, courts and armed forces, while moving their factories from the United States to Mexico. Or to other low-wage, high-polluting countries like China. Or to countries that charge little or no corporate tax. Once there, instead of paying the new, super-low 20 percent corporate rate Republicans propose for U.S-based producers, the expat factories will pay no taxes to the United States. Nothing. Not a cent.

Rather than Making America Great Again, Congressional Republicans plan to Make America Grieve Again as even more family-supporting factory jobs get shipped offshore to take advantage of the new tax rate of zip.

The math behind that job transfer is simple. Continue manufacturing in the United States and pay a corporate income tax dramatically lowered from 35 to 20 percent. Or move to a ridiculously low-tax country like Switzerland, Montenegro or Paraguay, and pay a measly 9 percent to that nation and nothing to the United States.

With the proposed corporate tax gift from Republicans, CEOs could uproot factories in places like Illinois, Indiana and Western Pennsylvania and ship them to brand new facilities in Bermuda, Palau or Turks & Caicos, where the corporate tax rate is zero. The corporation would pay no taxes on profits to the country hosting the factory and nothing to the United States, which hosts the headquarters.

Republicans contend such corporations will bring those foreign profits back to the United States and invest here. Why would CEOs do that when any American plant they invest in would be billed taxes on profits while the same factory located in certain other countries would pay nothing?

Why would they do that when they didn’t before?

Right now, corporations are sitting on $2.6 trillion in overseas profits. They have not invested that money in U.S. research, factories or jobs because they don’t want to pay the current 35 percent tax rate that would be charged when those profits are returned to the country.

To lure that money back, Republicans propose to give corporations a tax holiday, cutting the rate to between 5 and 12 percent for repatriating the $2.6 billion. The GOP insists corporations will take advantage of that tax deal to bring those billions home and invest in American production. But they won’t. The proof is that they didn’t last time.

Congress gave corporations a tax holiday in 2004 during which CEOs could return foreign profits to the United States and pay a mere 5 percent tax on them in exchange for investment in U.S. research, factories and jobs.

CEOs brought back the money and grabbed that 5 percent rate, alright. But they didn’t use the repatriated cash to conduct research, build factories or create jobs. Just the opposite.

A study by the Democratic staff of the Senate Permanent Subcommittee on Investigations found that the 15 corporations that benefited most from the tax holiday turned around and cut more than 20,000 jobs and diminished their pace of research spending.

Labeling the 2004 tax holiday a failed policy, the report cautions against repeating it, saying it cost the U.S. Treasury $3.3 billion in lost revenues over 10 years and led to U.S. corporations sending more funds offshore.

“There is no evidence that the previous repatriation tax giveaway put Americans to work, and substantial evidence that it instead grew executive paychecks, propped up stock prices, and drew more money and jobs offshore,” said former Michigan Senator Carl Levin, then-chairman of the subcommittee, when the report was released in 2011.

So the contention that corporations now would invest in U.S. research, factories and jobs because Republicans plan to give them another tax holiday is about as solid as smoke — the stuff emitted from American factories pre-NAFTA and now flowing from mills moved to Mexico. The same goes for the contention that corporations will invest in U.S. research, factories and jobs with completely untaxed foreign profits.

In fact, suspending taxes on foreign profits would create a perverse incentive for corporations to make it overseas instead of making it in America. But Republicans intend to do it anyway.

Republicans say they must cater to the tax demands of corporations because other countries – Germany and Ireland, for example – offer corporations low rates. And those same Republicans contend they must cease charging American corporations taxes on their foreign operations because other countries have stopped.

That describes a race to the bottom. Pretty soon, corporations won’t pay any taxes at all, anywhere to anyone. They’ll provide nothing toward the roads they use to transport their products, the school systems that educate their workers, the Army Corps of Engineers that protects factories from floods.

If countries don’t work together to stop corporations from playing one against the other, workers will get stuck with all of the costs. That’s what’s happening under the GOP tax scam. The tax changes were supposed to benefit middle-class workers. But they do not.

An analysis of the Senate tax plan, released this week by the Joint Committee on Taxation, which is the official nonpartisan review agency serving Congress, showed the scam would give large tax cuts to corporations and millionaires while raising the levies charged to families earning $10,000 to $75,000 – that’s low-income and middle-class families.

White House National Economic Council Director Gary Cohn said this week, “The most excited group out there are big CEOs, about our tax plan.” Of course they are. Those 1 percenters and their corporations get all the breaks.

To help pay for big fat tax cuts for millionaires and zeroed-out taxes for corporations, Republicans plan to slash programs crucial to workers – like Medicare and Medicaid – and vital deductions, like those for property taxes and student loan interest.

Just like NAFTA, this GOP tax scheme is a scam, a bait-and-switch ruse. Workers pay more and get less – fewer government services and far fewer job opportunities. This time, their jobs won’t just be going south of the border. They’ll be shipped anyplace in the world touting the lowest tax rates.

Leo W Gerard: Another GOP Tax Plan For Captains

Donald Trump
Image by DonkeyHotey CC FLIKR

It’s based on the same voodoo economics we’ve heard many times before.

As he ran for office, Donald Trump repeatedly reminded audiences that he was “really, really rich,” but assured voters that as president he would be a working man’s champion, a blue-collar Superman.

He said he would stop corporations from offshoring manufacturing jobs with a border adjustment tax on imports. He would end trade cheating and declare China a currency manipulator on his first day in office. He would launch within his first 100 days a $1 trillion infrastructure improvement program to create millions of jobs fixing the nation’s airports, bridges and roads.

Trump’s record of promise-keeping to America’s working men and women in his first 100 days is this: So far, no good. The tax plan, well, the one-page tax sketch that the administration released last week is symbolic. While it would slash federal levies on fat cats and corporations, administration officials refused to say it would help the middle class at all. And it contains no border adjustment tax.

The tax plan rewards the captains of industry, the captains of Wall Street, the captains of real estate, like, well, like Trump himself. But the middle class, not so fast. The poor, not at all. Someone needs to tell Donald Trump that banksters and real estate tycoons sporting navy golf polos aren’t blue-collar workers. The tax scheme, like so many of Trump’s other pledges to workers, is a stab in the back of that indigo shirt.

On the campaign trail, Trump said rich people like him should pay more in taxes. Yet, the tax plan he offered last week would cut his taxes – by tens of millions a year. That’s because it would eliminate the alternative minimum tax. This is a levy intended to require billionaires like Trump to pay at least something after subtracting their multitude of special-rich-people deductions.

Trump has refused to release his tax returns – the first American president to keep them secret since Gerald Ford, who provided summaries. But Trump’s 2005 return, uncovered in part by a newspaper, shows that he had to pay $31 million as a result of the alternative minimum tax.

Trump’s plan also calls for eliminating the estate tax. That is paid only by people who inherit more than $5.5 million – as Trump’s children will. And it calls for cutting by more than half, to 15 percent, the tax paid by entities called pass-through corporations. Trump’s attorneys indicated in his presidential financial disclosures that his approximately 500 businesses are almost all pass-throughs.

Trump will be hobnobbing with his country club buddies in benefitting from this break. A 2015 study by the nonpartisan National Bureau of Economic Research found that the top 1 percent gets 69 percent of pass-through income.

Right now, a worker can’t get in on that low 15 percent tax rate unless reporting income below $37,950. But doctors and lawyers and investment bankers would get that special discount rate, no matter how much they make, as long as they pay a few bucks to establish a pass-through corporation. Trump’s plan would allow a lawyer paid $1 million a year to cut his taxes by $180,000 by setting up a pass-through.

Certainly, with all of those perks going to the nation’s most wealthy, Trump’s tax men would assure workers that they will benefit too.

Not really. When asked on ABC’s “Good Morning America” last week whether the middle class would pay more under the plan, Treasury Secretary Steven Mnuchin said: “I can’t make any guarantees.”

And the director of Trump’s National Economic Council, Gary D. Cohn, could not say how much of a break – if any­ – a middle-income American would get under the plan.

If it’s not absolutely clear who Trump’s tax plan would benefit, there’s also this from George Callas, the senior tax counsel for the Speaker of the House. Callas wants a permanent break for corporations, saying of a temporary one:

“It would not alter business decisions. It would not cause anyone to build a factory. It would just be dropping cash out of helicopters on corporate headquarters for a couple of years.”

Lots of small towns in Ohio, Michigan and Pennsylvania – towns that suffered when corporations offshored factories, towns that voted for Trump – would really benefit from cash dropping out of helicopters for a couple of years.

But that’s not Trump’s plan.

Trump’s money men, Mnuchin and Cohn, said slashing levies on the wealthy will pay for itself because giving the rich more cash will spur economic growth. So, no need to worry about Trump’s tax cuts ballooning the national debt, they assured.

This is called the Laffer Curve. Really.

Economist Arthur Laffer, an adviser to Trump, explained to the Washington Post last week that it works like this: “When you think about cutting that corporate rate, let’s say, from 35 to 15, that’s not going to cost you any money.”

He convinced the likes of Ronald Reagan and George W. Bush this hocus-pocus would work. And now, he has bamboozled Trump.

Both Reagan and Bush cut taxes. Both also left the country with larger deficits and uneven economic growth. Reagan raised taxes several times after his initial 1981 cut. Bush gave the country the Great Recession.

Laffer still insists his curve works, contending, “It’s a no-brainer.”

No. It’s voodoo economics. That’s what George H.W. Bush called it.

The Committee for a Responsible Federal Budget, a nonpartisan group that advocates fiscal restraint, estimated that Trump’s Laffer tax plan could reduce federal revenue by $3 trillion to $7 trillion over a decade. The economy would need to grow at a rate of 4.5 percent to make that proposal self-financing.

It grew at a pathetic 0.7 percent during Trump’s first quarter in office. In President Obama’s last quarter, the fourth of 2016, it increased at 2.1 percent. To rise at 4.5 percent would be phenomenal. Maybe paranormal.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, put it this way: “It seems the administration is using economic growth like magic beans: the cheap solution to all our problems.”

Ronald Reagan, who like Trump was adored by blue-collar workers, promised that benefits from his massive tax cuts for the rich would trickle down to the rest. That never worked. But now Trump is taking advice from the same Svengali and promoting the same flim-flam plan.

Those heartland workers can’t tolerate another hit. But it’s not just taxes. The health insurance proposal Trump is pushing would cost many low- and middle-income workers thousands of dollars more a year. Trump has proposed eliminating the Chemical Safety Board, which prevents workplace deaths. He delayed rules protecting workers from deadly silica and beryllium. He signed a law ending a requirement that large federal contractors disclose and correct serious safety violations. Trump has no federal infrastructure plan and reneged on naming China a currency manipulator.

These are all the actions of a president protecting the captains of commerce, not one championing blue-collar workers.

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