Bill Honig, former State Superintendent of Education in California and owner of the Honig Vineyard, has closely studied the Republican Tax Plan and found that it is even more harmful than originally presented.
He writes:
The GOP/Trump tax cut bill is a much more massive shift of the tax burden from the wealthy to the middle-class and low income families than reported–essentially borrowing from the future, taxing the working classes, and cutting needed services to finance an unnecessary tax cut for the wealthy who are already living high on the hog and receiving an unprecedented share of post-tax income.
“For the full FAQ sheet http://www.buildingbetterschools.com/2017/12/26/faq-for-gop-trump-tax-bill/ Text below.
“FAQ on the GOP/Trump Tax Cut
“How Large Is It?
“Most reporters and commentators characterize the GOP/Trump tax cut legislation as a $1.5 trillion bill. That’s not remotely accurate and seriously underestimates the magnitude and severity of the recently passed law. According to the latest Congressional Budget Office analysis, the ten-year effect of the legislation is a net $3.9 trillion tax reduction (more than 2 ½ times what is being reported) even after you subtract the elimination of $1.3 trillion of corporate deductions from the total of $5.2 trillion in total tax cuts.
“Who Benefits?
“The tax reductions overwhelmingly benefit mega-wealthy families and corporations. Many of our most well-off citizens will annually pocket tens of thousands of dollars and some even millions while everyone else receives meager tax breaks or in some cases immediate higher taxes. Tax cuts which do help middle and low income families in 2018 (inflated to be in time for the 2018 elections) diminish over time until they are eliminated. According to Tax Policy Center, ten years from now 83% of the cuts will go to the top 1% and 53% of American families will suffer a tax increase–a classic case of bait and switch. In contrast, the corporation cuts are permanent.
“Do the wealthy really need such a large tax break so that they can buy another mansion, a bigger yacht or jet, throw another party, buy another designer outfit, or pad their bank accounts while tens of millions of families living paycheck to paycheck receive a pittance or get taxed? Republican mega-rich donors must think so because they drove the whole perverted process by which the tax bill was passed.
“Who Pays?
“Middle and low income families. The $3.9 trillion net tax cuts in the GOP bill are paid for by;
“borrowing $1.5 trillion or more by increasing the federal debt–a burden on our economy and our children in years to come;
“raising $2.1 trillion in taxes on mostly middle-class and working-class families by eliminating the personal exemption, changing the inflation measure, capping state and local tax deductions (which primarily affects the upper-middle class in blue states), and some other miscellaneous deductions; and
“cutting $314 billion from health care by eliminating the mandated Obamacare contributions which will have the added harm of increasing premiums by 10% and dropping 4-9million people from medical care.
“Thus, this tax cut bill is a much more massive shift of the tax burden from the wealthy to the middle-class and low income families than reported–essentially borrowing from the future, taxing the working classes, and cutting needed services to finance an unnecessary tax cut for the wealthy who are already living high on the hog and receiving an unprecedented share of post-tax income.
“What Happens to Inequality?
“This country is currently suffering from dangerously high levels of inequality not witnessed since the Guilded Age and the Roaring Twenties–the latter period followed by the Great Depression of 1930’s caused primarily by the failure to pass down to workers enough wages to sustain demand. A multitude of research has shown that high levels of inequality stunt economic growth and opportunity. At present, the top 1% own 40% of US wealth which is more than the combined wealth of the bottom 90% and receive almost 20% of yearly income which is about twice as much as the share of the bottom 50% of families. The GOP/Trump tax plan will make this bad situation much worse.
“Was There Any Bi-partisan Support?
“Not one Democratic senator or member of Congress voted for the GOP/Trump tax plan, so broad support is absent. Because the GOP congressional leaders rushed the drafting of the bill behind closed doors flouting normal procedure with no public hearings, there are many errors and hidden rip-offs creating fertile soil for gaming the tax code by such methods as turning individuals into corporations. Last minute loopholes and outright looting were obtained by lobbyists such as the pass-through write-off for real estate trusts which benefit real-estate moguls such as President Trump and his family. The real cost of the bill may turn out to be much higher and borrowing could exceed $2 trillion.
“How Extensive is the Collateral Damage?
“Severe. Existing budget rules, unless changed (good luck), mandate large and growing cuts to Medicare due to the increased deficit–$25 billion in 2018 and over $400 billion in the next ten years. GOP’ers are already using the existence of a larger deficit to refuse to fund health services for 9 million children under the CHIP program, insisting on public health cuts for millions of other children and calling for cuts to Medicare, Medicaid, Social Security, and medical and basic research. Republican leaders and President Trump are also proposing wide-spread reductions in other public services. For example, the proposed GOP budgets reduce federal funds for public schools while the GOP tax bill gives wealthy private school parents a significant tax break–in effect subsidizing private schools at the expense of the public school sector. This is consistent with many Republican politicians and the President’s expressed hostility to public education and encouragement of privatization of our public schools.
“Will There Be Enough Growth to Offset the Increased Debt?
“Nope, or minimal at best. GOP arguments that that the tax cuts for the wealthy pay for themselves by causing higher economic growth which will increase tax revenues to pay for a substantial portion of the larger deficit have been debunked by almost every reputable economist and the federal financial advisors who forecast minimal growth from the cuts. Furthermore, if there turns out to be greater revenues from greater growth, they are necessary to pay for current Medicare, Medicaid, and Social Security future obligations. To divert them to the un-needy wealthy now means cuts in these programs later.
“Was There A Reversal of Settled Tax Policy?
“The GOP tax bill violates elementary standards of good policy by creating different classes of winners and losers. For example, for the first time in our history, tax legislation overwhelmingly favors those who earn through capital over those who earn from wages.
“Does the GOP Rationale for the Tax Bill Withstand Scrutiny?
“No. The major selling point of the GOP is the assertion that reducing the corporate rate will substantially increase growth and workers will receive sizable benefits from that growth. That contention is also disputed by the vast majority of economists, the official scoring reports and the history of tax cuts and tax increases. Bush II cut taxes and subsequent growth was weak; Clinton raised taxes and subsequent growth was spectacular which flies in the face of the GOP theory.
“The GOP’s specific argument that wages will rise significantly because giving corporations more cash and lower taxes will cause them to invest, which will increase productivity, which will then be shared with their employees, doesn’t hold water. According to recent reports such as the one by the Economic Policy Institute each assumption is false. Corporations currently are awash with cash, corporate profits as a percentage of GDP are at their peak, the corporate tax share of federal revenues has plummeted (the wage share has skyrocketed) and yet large-scale investment hasn’t occurred. No surprise there. Investments are made based on projected demand. Availability of cash and tax rates play a small part in those decisions. More importantly, productivity gains during the past decades have not been shared with workers.
“Instead, the increased profits for most firms have been used to buy back shares to raise stock prices, balloon executive pay, and increase distributions to shareholders. That same overall pattern occurred when billions of dollars were repatriated in 2004. A repatriation holiday allowed corporations to bring back billions of overseas profits at a lower rate. The 15 companies that brought the most profits back to the U.S. used them to buy back shares instead of boosting investment, and actually ended up cutting jobs and slightly lowering their research and development spending. Why would corporate behavior change this time around? Experts say it won’t. Even the most optimistic predictions suggest that only a small percentage of any increased cash or profits from corporate tax cuts will be given to wage earners.
“For individuals, one of GOP’s more discredited arguments is that the super-wealthy pay the lion’s share of taxes so if taxes are cut they will have to receive most of the benefits. That’s nonsense. It’s true that the rich pay a large percentage of income taxes because, unlike most families, their before tax incomes have grown substantially during the past decades. However, the canard that these rich families pay almost all of federal taxes is demonstrably false. Income taxes constitute less than half of federal taxes. Payroll taxes are a third. The wealthy pay no payroll taxes on income just over $100k which means for mega-earners most of their income is exempt from payroll taxes. Corporate taxes were at record low levels in 2016 at only nine percent of federal tax receipts. There was no shortage of ways to ease the tax burden on the middle class without providing the rich with a windfall, if that’s what the GOP and the president wanted.
“Were There Much Better Ways to Stimulate Economic Growth and Increase Wages?
“Failure to bolster demand by sharing profits with workers is the most likely reason for low investment. Worker’s wages have been essentially flat for decades.
“If the goal was to increase wages, the tax plan could have just given wage earners a larger share of the tax breaks directly, reduce their payroll taxes, or invest in rebuilding the US. Growth strategies which aim at increasing demand or direct investment result in much higher growth than trickle down measures.
“Particularly galling is the lost opportunity to re-build America. If we are going to borrow over a $1 trillion, wouldn’t it have been fairer and much more productive to invest it in fixing our roads, bridges, ports, fire and flood protection, airports, schools, and power grids instead of giving an unneeded windfall to the rich? In fact, the GOP could have chosen to invest in infrastructure without increasing the debt by just closing the corporate loopholes agreed to in the bill and not giving a whopping tax cut to the richest Americans. The economic payoff from building infrastructure is multiples higher than tax cuts skewed to the ultra-wealthy and corporations, with the added benefit of creating jobs and improving the health and safety of the nation. Unfortunately, any proposed GOP/Trump infrastructure plan for 2018 will be woefully short of funds because of the heavy debt borrowing to finance tax cuts for the rich.
“Were Corporations‘ Taxes Higher Than Other Countries?
“The GOP’s other argument made is that the US corporate tax rate of 35% was among the highest in the world and non-competitive. They contend that lowering it to 21% will attract investment from foreign companies or US companies threatening to leave. Actually, because of loopholes, our effective tax rate was 23%–already below the world average and thus competitive. Since most loopholes in the GOP tax bill weren’t changed, effective tax rates will plunge to 9% according to a UPenn-Wharton estimate, basically giving corporations a free ride. Since corporate taxes as a share of total taxes are already at historic lows, further lowering of their rates shifts that much more of the tax burden to the middle and working classes. Furthermore,, even if foreign corporations invest here, why would we think that these companies would act differently than domestic companies in allocating a decent share of profits to workers?
“How Much Do Foreigners Benefit?
“Corporate shareholders, most of them wealthy will do very well under this GOP/Trump tax bill. Unfortunately, nearly a third of them are foreigners, mainly millionaires and billionaires, so the effect of the GOP tax plan is to borrow from the future and tax the middle and working classes in order to ship large amounts of cash out of the country. Make America Great, indeed?
“Is This the Best Time for Massive Tax Cuts?
“Finally, with unemployment low and a potential recession on the horizon this is not the time to add to the debt and disarm our ability to fight a downturn when it arrives.”
Diane Ravitch's blog 
This whole scam is just sickening. The GOP worked secretly to give their wealthy donors more money and then blatantly lied that this is a ‘tax break for the middle class’. Here is what Thom Hartman has to say on the subject:
……
How the GOP Tax Cut Will Also Shrink Your Paycheck
When Republicans cut taxes, wages go down or stay flat for working people.
By Thom Hartmann / AlterNetDecember 29, 2017, 1:38 PM GMT
The morbidly rich billionaires who own the Republican Party know that when working/middle-class people get a tax cut, it means that over time working-class wages will go down – which is why they’re more than happy to give us all a temporary tax cut….
https://www.alternet.org/news-amp-politics/how-gop-tax-cut-will-also-shrink-your-paycheck#.WkebZtxIjn4.gmail
You should have explained Hartman’s logic on that .
If take home pay goes up then there is less pressure to meet inflationary pay raises .
But that argument can be used many ways :
if taxes are raised to pay for national healthcare than employee wages and employer costs can stay lower as the burden of health insurance is lifted and shared by a bigger base.
Or if States shift more burden to employers in the form of corporate taxes or employer based payroll taxes . Employers can hold down wages because the burden was not placed on employees …….
“Not one Democratic senator or member of Congress voted for the GOP/Trump tax plan, so broad support is absent……”
And I might add that not one Democratic senator or member of congress articulated the negative aspects of the bill in a substantial way or offered an alternative to this rushed and crappy legislation. As usual, partisan bashing with no emphasis on what the democrats would offer as an alternative. Until a legitimate third party is embraced by the electorate it will simply be a ping pong match between two corrupt parties that tend to the biddings of lobbyists and elites.
Thanks for the post. The information shows how far the Republicans have gone off the rails. They have earned my scorn. I think it fair to call their behind-the-door writing of this deliberately garbled “reform” anything but a way to make America great.
Wait – Not every GOP CongressWhitePerson is wealthy. Send them this column! Make them defend it.
They’ve got other issues with an African-American more popular and effective than their guy, they may not believe in science, they may hate regulations on land use and energy… but they AND THEIR CONSTITUENTS are not wealthy.
The ONLY push back from the masses vs. GOP elected folks has been the health care bill (and they still got screwed (sorry) with this tax bill on health.
This column above is sadly spectacular. Every GOP candidate for Congress must be pressed to respond to these points. They must be pressed to defend them. Keep asking and don’t let them dance around answers.
Send it to every editorial board, the smaller the town and paper the better. Billboards work, too!
If your GOP senator is like mine – the office is probably closed whenever there’s a vote (like days before and of tax vote), calls go to voice mail jail, and emails get a canned reply.
START NOW – we’ve already learned what happens when we start too late and it’s never enough (remember – the president lost by 2 million votes and the sore losers now claim fraud and recounts)
Generally a good summary of the situation . I only have a few qualms :
Although at some point sometime in the future deficits may squeeze out capital making
borrowing for private investment more expensive . There are a few things that are
disheartening about the argument, the Japanese have a debt to GDP ratio of 240% to our 106% . The Japanese have a 0.6 inflation rate and a 2.8 percent unemployment rate.
It would seem that deficits being a problem for future generations may be in the distant future, in a galaxy far far away . I am not saying this to justify the tax cut nor deficit spending . I see no need to give the bipolar Republican party the ammunition to gut the New Deal after they have gutted the tax base for near 40 years. . There is nothing more disheartening than having a Democratic politician come on TV and talk about the deficit. Most people have no Idea how to interpret the numbers and compare government to personal finance . The second most disheartening thing is to have my door bell knocked on by a Democratic canvasser and have that young person say “Tracey is for keeping your taxes down ” Listen kid, if keeping my taxes down is my concern I would vote Republican . I believe you can check with Harry S Truman on that one. Tracey got my vote but lost in my LI town.
The tax plan is massive social re engineering designed by Republicans as much to put money in the pockets of the Donor class both large and smaller businesses,(the smaller ones used to be referred to as bodega Republicans here in NY)
as it is to turn the Nation back to the 1920s when these “major and minor Oligarchs ” ruled with impunity.
Go to your Democratic congressman’s Facebook page(most Republicans wont have one) . Look at the comments on the tax bill . They have three themes : (1) Congressman what can you do to stop this . (nothing ) . (2) A whole lot of people who really have no clue and even wont after the bill goes in effect are screaming about the tax increase (3) What can we do to cut our local taxes and that is big!!!!! BINGO ,BINGO, BINGO.
That is exactly the response the designers of the bill wanted and the answer to that question is to return government to that pre new deal era. To “shrink government at all levels to the size of a pin head ” . To privatize all government services from schools to infrastructure spending and break public and private sector Unions. With of-course the exception of the Police needed to curb the unruly masses.
Which leads to another major qualm , Democrats did nothing to participate in this bill but does that mean that they proposed a completely different vision for the American people to chose from . They didn’t, they had no objection to corporate tax cuts in theory. They just proposed “kinder gentler ” cuts tied to closed loop holes that a boat load of tax attorneys would have opened before the ink was dry on the new law.
When you ask as I have, what will you do to reverse this? The answer you get is first we must take power .. Well yes Rep Tom Suozzi , et al , but what will you do to reverse this when you take power .
NOTHING or you would already have a progressive vision for America . It isn’t about schools , or healthcare , or infrastructure . All politicians have a vision for those things . It is who and how and how much we are willing to pay for the things we want to do. That is a discussion few Democrats since Walter Mondale want to have with the American people
SOME members of the Democratic Party offer an alternative budget every single year… but it is ignored by the media… and the DNC… https://cpc-grijalva.house.gov/the-peoples-budget-in-the-news/
MAYBE in 2018 the Congressional Progressives will decide that the time is ripe for them to break away from the DNC and form a third party to the left of the two legacy parties…. or MAYBE the DNC will realize that more and more voters are seeking an alternative to the status quo… and MAYBE I’ll see a unicorn at my bird feeder…
it goes directly to what Bill Honig stated, Republicans want wages to go down. A decrease in wages means unions have lost their bargaining power. As Joel Herman stated, it is about them becoming Oligarchs to rule with impunity.
Dump is a treasonous liar and should be impeached. He is MAD, meaning crazy. He is also MEAN and lining his and his fellow GOP’s pockets. That is really what the Dump administration is all about.
Not only is that tax bill a scam and a fraud but the GOP is purposely weakening and decimating regulations that protect us from the economic predators. Trump is stacking the courts with right wing apparatchiks who will rule against unions and in favor of the plutocrats. The libertarian b******s will be dancing in the streets.
Minor point: Guilded Age should be Gilded Age. I wish we had a Guilded Age, meaning an age in which labor unions are strong and thriving. That’s my favored interpretation of guilds or labor guilds.
I was thinking a bit more positively, about the coming of the next gelded age .
There are 2 parties in Congress. One chose not to work with the other in the hopes of causing a major economic furor and lots of talking points for the ’18 elections. They elected to stand on the sidelines and collect a pay check. The other party is trying to address the jobs problems and make improvements in the ACA. They want and need Dem help. A 10 year deadline on tax cuts is not what the Reps wanted but they needed 60 votes. Thus a 10 yrs limit was created by the Dems. It can be made permanent with mutual cooperation. If these numbers came from the CDO—how can we believe them? Give it at least 1-2 years before calling out the lynch mob!
April, you probably need to go back on the meds ASAP.
Supply-side tax cuts enrich the rich. They do not “trickle” down. They never have. Moreover, the legislation was done in secret, behind closed doors. Democrats were quite purposefully excluded. Worse, the Republican tax bill will likely add about $2.5 TRILLION to the national debt. Oh, and guess what? When they break the economy again, they’ve left in place the mechanism by which American taxpayers will the on the hook to bail out the crooks. Again.
Your comment is atrociously myopic and seriously in error.
April: “The other party is trying to address the jobs problems and make improvements in the ACA.”
I missed how the GOP is addressing the jobs problem. Please elaborate. There is now no money for improving our failing/crumbling infrastructure. It is all going to the wealthy.
As far as improvements in ACA, I doubt that letting healthy people drop and take the chance that they will not ever get ill or have a car accident is a scary way to live. Cutting subsidies for those who need help in paying the premiums won’t benefit those who are desperate (SICK) and probably they won’t like seeing their premiums rise at least 10% or higher.
Please elaborate on how the GOP is making improvements to ACA? I’d like some details. While you are at it, please also elaborate on how tax cuts for the wealthy that will result in billions of cuts to Medicare is going to help seniors. I’m on Medicare and I want some answers. I haven’t read anything about how this cut will help me and I’d like something positive to say so I can tell my friends.
The tax bill is what Republicans stand for; it’s what they believe in. Republicans are directly opposed to the vast majority of American citizens.
That Republicans got the tax bill they wanted through a contorted, twisted legislative process, and with the aid of Russian money and the signature of a president* put in office with the covert assistance of Russian intelligence agencies, suggests that they are inherently unAmerican.
I wonder when the goobers will wake up. And I wonder when education “leaders” in the U.S. will realize it’s way past time to emphasize democratic citizenship as the premier mission of public schooling.