Statement of the DSA National Political Committee
Oct. 5, 2017
President Trump came to office allegedly aiming to “drain the swamp” of privileged “special interests.” But his regressive massive tax cut proposal provides further evidence that the Trump administration serves the interests of the oligarchs.
As with the past Reagan and Bush II tax cuts, the Trump proposals would give away over 2 percent of the GDP (or in today’s dollars $340 trillion) every year to the wealthy and corporations while denying needed revenues for social services and infrastructure expenditure.
As with past Republican administrations, Trump hopes to stimulate the economy by massively redistributing income upwards and radically boosting military spending. This “military Keynesianism” of the Reagan and Bush II eras gave rise to the respective speculative bubbles of the savings and loan crisis and the sub-prime mortgage crash. Thus, to avoid a disastrous redistribution of income and wealth upwards, DSA will join the “Not One Penny” efforts to insure that the Trump tax cuts are defeated and that any tax reform must ease the regressive tax burden on the working class.
Trump’s “Make America Great Again” for the wealthy tax cut plan would reduce the top tax bracket from 39.6 percent to 35 percent; this would only benefit families making over $418,000 a year. The plan would do nothing to aid the one-third of American families who do not pay federal taxes, but who pay regressive state and local real estate and sales taxes. 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.
The briefest analysis of the Trump tax cut plan reveals how it would sharply redistribute income and wealth upwards. The administration claims that its cutting the tax rate on “pass through-income” to 25 percent would benefit small businesses. But most small business owners pay lower overall taxes already. Rather this tax break would mostly aid the millionaires who earn their income through private equity firms, partnerships, and limited liability companies. According to the Center for Budget and Policy Priorities the 400 richest households would save an average of $5.5 million each. If that were not enough upward redistribution, the proposed elimination of the estate tax would only benefit the top 0.2 percent of people who die every year and owe the tax.
If these benefits to the rich were not sufficient, the tax cut plan provides huge benefits to corporations as well. Today the nominal corporate tax rate is 35 percent, though the average effective tax rate on US corporations is 15 percent, with many of the largest transnationals using accounting tricks to shift earnings abroad and avoid paying US taxes altogether. Trump now proposes to lower the nominal corporate tax rate to 20 percent. But the problem is not that corporations pay too much in taxes, but, rather, too little. In 1962 corporate taxes represented 25 percent of federal revenue; today it is under 8 percent.
Most budget watchers estimate that the Trump tax cuts would deny the federal government over three to seven trillion dollars of revenue over the next ten years. By eliminating the tax deduction for state and local taxes, it would penalize states that use progressive taxation to fund public goods. In short, the Trump tax plan follows Grover Nordquist’s 1980 adage that Republican tax cuts should drown the baby of reduced government in the declining bath water of lower taxes on the rich. In contrast, we need more public expenditure on infrastructure, alternative energy, job creation and free higher education, as well as the implementation of Medicare for All.
These basic human needs can only be served if we fight for a truly progressive tax system that taxes the affluent and corporations at levels comparable to other major post-industrial economies. To achieve that, 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.