Statement of the National Political Committee of Democratic Socialists of America
November 25, 2017
President Trump came to office allegedly aiming to “drain the swamp” of privileged “special interests.” But the tax proposals put forth by Trump and the GOP are a gift to these same interests, an all-out assault on equality, and class warfare waged by capital. We urge all DSA locals to join the Communications Workers of America (CWA) and Jobs with Justice rallies against the tax cuts at local Senate offices on Wednesday November 29th! Check with your local CWA or Jobs with Justice office. At a minimum call your Republican Senators and urge them to vote no. Click here to see how.
The House and Senate versions of the Tax Cuts and Jobs [sic] legislation differ in some respects but their goals are identical: more money for the top 1%, especially for income from capital, and tiny tax cuts for most. And the latter mostly disappear by 2027.
As with the past Reagan and Bush II tax cuts, the Trump/GOP proposals (in either the House or Senate version) transfer over 2% of the GDP every year to the wealthy and corporations while denying needed resources for social services and infrastructure. In today’s dollars 2% = $340 billion. The Senate bill proposes $400 billion cuts in Medicare funding over the next 10 years and would prevent any possibility of enacting Medicare for All. As with past Republican administrations, Trump and the GOP claim that tax cuts to corporations will stimulate the economy. They say businesses will have more after-tax money, make new investments, hire more workers, pay them more and thus propel an economic boom. Trump ran on this program. This “trickle down” philosophy has never yielded a significant increase in investment; it has led to major gains in corporate profits. DSA opposes taxing the 99% to give to the 1%, and we will join the “Not One Penny.org” efforts to insure that the Trump tax cuts are defeated and that any tax reform must ease the tax burden that falls hardest on the working class.
By failing to increase the Earned Income Tax Credit, Trump makes clear his disdain for the needs of the very working families he claims to serve. Instead, both bills reduce tax rates for the wealthy, sometimes in hidden ways. The new child credit would be available for families with incomes as high as $1 million, instead of capping this credit at $110,000 as is currently the case.
Already now many businesses (private equity firms, partnerships, limited liability corporations, S-corporations and sole proprietorships) pay little in the way of corporate taxes. Their business income is “passed through” to the owners, who only pay individual income tax on it (top rate 39.6%) One of the central planks of the Trump/GOP tax proposals is to sharply reduce taxes on “pass-through income.” The rate is reduced to 25% in the House bill. The Senate bill gives a significant 17.4% tax deduction for pass-through income. 70% of income from pass-through entities goes to the top 1%. Thus these proposals would benefit the millionaires. This includes Trump, who has over 500 pass-through entities.
And then there is the issue of the over $2 trillion in profits that US multinational corporations have stashed “overseas.” Under the proposed legislation, repatriation of these profits would incur a tax of only 10-12%, substantially less than even the proposed reduced corporate tax rate of 20%!
The favoritism to capital income over labor income is perhaps most evident in the tax cut to corporate income, from the present 35% to 20% in both bills. Although the nominal corporate tax rate is 35%, the average effective tax rate on US corporations is about 15%. In fact, many of the largest transnationals use accounting tricks to shift earnings abroad and avoid paying US taxes altogether. Yet the problem is not that corporations pay too much in taxes, but that they pay too little. In 1962 corporate taxes represented 25% of federal revenue; today it is under 8%.
Both the House and Senate versions will do nothing to aid the one-third of American families who pay little if any federal income taxes, but who pay regressive state and local property and sales taxes. By cutting or eliminating the tax deduction for state and local taxes (SALT), both bills would penalize states that use taxation to fund public goods. The top six states targeted by this cut in the SALT deduction are CA, CT, MD, NJ, NY, and OR. All voted for Clinton, all have minimum wages well above the federal level and all are more unionized than the US as a whole. In short, the Trump/GOP tax proposals punish liberal states.
The Trump/GOP tax proposals show touching concern for capital in other ways also. Both the House and Senate versions modify the Estate Tax to allow more wealth to flow freely across generations. The proposed elimination of the estate tax would only benefit the top 0.2% of people who die every year and owe the tax – 2 people out of every 1000.
Most budget watchers estimate that the Republican tax cuts would deny the federal government over three to seven trillion dollars of revenue over the next ten years
Basic human needs can only be served if we fight for a truly fair tax system that taxes the rich and corporations at levels comparable to other major post-industrial economies. To achieve fairness DSA recognizes that we must build a multi-racial coalition of working people, grounded in a revitalized and democratic trade union movement. Defeating the Trump tax cuts for the rich and corporate America would be the first step towards achieving that goal.
Democratic Left blog post submission guidelines can be found here.