A tax-cut house of cards
What do we need to know about the Republican tax plan that is convulsing Washington, but which even the most attentive readers are having difficulty following?
It is this: The tax bills, both House and Senate versions, are a massive payoff for corporate contributors to both parties, and have almost nothing to do with benefiting the “middle class.”
Follow the money: Fully 75 percent of all the tax cuts go directly to corporations. The fine print’s even worse; the tax cuts for individuals are temporary, while the corporate cuts are permanent. The bill takes away, or limits, deductions for medical care, college loans, and state taxes, on which the middle class now depends.
Republican leaders half-heartedly claim this is “tax reform,” even though the tax cuts allegedly increase the federal deficit by $1.5 trillion over 10 years, and probably far more.
There’s certainly much about the corporate tax code that needs reform. For instance: Maine has enormous amount of low-grade wood fiber that could be sustainably harvested, if we could turn it into biofuels. But wood-based biofuel isn’t competitive because corn-based ethanol is already heavily subsidized at two different levels — as agriculture, and as motor fuel.
On a larger scale, we’re still subsidizing fossil fuel production through the tax code, even though global warming makes it urgent to replace coal, oil and gas with renewable energy sources.
Does the Republican bill rein in these preferences? Of course not. It keeps most of them and adds many more.
As David Stockman, Ronald Reagan’s budget director, memorably put it — after Reagan’s massive 1981 tax cuts had become law — the entire bill text “was always a Trojan horse to bring down the top rate.” So too with the current Republican bill.
The Reagan bill offered huge cuts for wealthy individuals; the current plan repeats the process for corporations. Its heart and soul is cutting the corporate rate from 35 percent to 20 percent; everything else is window dressing.
No one can pretend that corporations are truly inconvenienced by the current tax code; corporate profits, as a proportion of the economy, have almost doubled since the 1970s, while wages have shrunk.
The nation’s real need is to invest in public services, where our schools, roads, rail lines, fire departments, law enforcement and public health agencies have deteriorated. Instead, the Republican plan would further gut the public sector and put even more of the national wealth in private hands.
Can this miscarriage of tax policy actually pass? Hard to say. In the Senate, where it would die, there are plenty of Republicans with good reasons to vote against it.
Departing Sen. Bob Corker, R-Tennessee, said earlier that he couldn’t vote for any bill increasing the federal deficit — $666 billion annually, and rising — as this one obviously does, but he’s fallen silent. Main’s Republican Sen. Susan Collins hints she can’t vote for repealing the Affordable Care Act’s insurance mandate, which the Senate bill does.
Republicans lack the 50 votes they need, even under a “budget reconciliation” process completely unsuited to a major tax overhaul. Yet the question has to be, why is it even this close? Why doesn’t the effort implode from its own absurdity?
For the answer, we have to consider the other party, the Democrats. Since Reagan’s day, Democrats have been unable to say that government needs revenue, and we need to raise enough through taxes — including individuals and businesses with a disproportionate share of society’s wealth — to meet our collective needs.
John Kerry couldn’t do it. The 2004 presidential nominee didn’t actually vote for George W. Bush’s tax cuts of 2001 and 2003, but he did nothing to stop, or even criticize them.
His Democratic primary opponent, Vermont Gov. Howard Dean, did, saying, “The question is not how big the tax cut should be. The question should be, ‘Can we afford a tax cut at all.'” But elected Democrats ignored him.
President Barack Obama did let some of the Bush cuts expire, but did nothing to raise revenue for any pressing need, even such an obvious one as the nation’s crumbling highways and bridges.
Even today, Democrats, or a functional Democrat like Maine’s Sen. Angus King, can’t bring themselves to say, “With the deficit rising, a recession probably not far off, and so many unmet public priorities, what we need isn’t a tax cut, but a targeted tax increase. We can afford it.”
Until that day comes, these utterly fantastic tax schemes will rule Washington. When another Howard Dean arrives, and is elected, they will collapse like a house of cards.
Douglas Rooks has covered the State House for 32 years. His biography, “Statesman: George Mitchell and the Art of the Possible,” is now available. Comment is welcomed at: drooks@tds.net
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