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Ethics & Religion
November 9, 2017
Column #1,890
An Immoral Tax Cut
By Mike McManus

The House has passed an immoral tax cut that would primarily cut taxes on the rich while asking the middle class to give up deductions to pay for it.

It is immoral at five levels.

First, it would increase the federal debt by $1.7 TRILLION over 10 years, reports the Congressional Budget Office - not $1.5 trillion as Republicans claim. "It betrays the nation's children, and their children, who would eventually have to pay for this big unpaid-for tax cut that the country does not need," editorialized The Washington Post.

Second, most benefits go to the very rich, the top 1%. The federal estate tax, which is paid only by people who die with estates bigger than $5.5 million, would be eliminated costing the government $269 billion over a decade.

If Trump's estate is $3 billion when he dies, his heirs would get $1 billion less. Can't they live on the $2 billion they inherit?

Tax rates on pass-through businesses and partnership income are cut costing the Treasury $441 billion. Rich people have so many deductions that many would pay tiny taxes, if it were not for the "Alternative Minimum Tax," Donald Trump had to pay $31 million due to AMT in 2005. By eliminating it, the government will lose $696 billion over a decade.

The key tax cut is to reduce the top tax rate of corporations from 35% to 20%. True, U.S. corporate taxes are higher than other countries. Lowering them might spur more investment. But some allege that corporations would raise the incomes of employees. More likely, corporate dividends would be raised. "A windfall for stockholders and not workers," says Steven Rosenthal of Urban Brookings Tax Policy Center.

Since 35% of U.S. corporations are owned by foreigners, $70 billion of tax benefits would go to them.

A third level of immorality is that these corporate tax cuts would spark "no real economic stimulus," says Larry Summers, former Treasury Secretary. Maya MacGuineas, President of the Committee for a Responsible Federal Budget, adds: "No credible model shows that tax cuts will create enough growth to fill the funding gap."

Why? The economy is not in a recession which might justify big tax cuts. In fact, the 4.1% unemployment rate is the lowest in decades, and the economy is growing at a fast 3% clip.

A fourth immorality is how some of the tax cuts to the rich are being paid for. First,
people with the lowest incomes would see an INCREASE in their tax rate from 10% to 12%.

Second, tax breaks for medical expenses are being eliminated, though they are used mainly by people with serious or chronic diseases. Third, deductions for college tuition and interest on college loans would be wiped out. Fourth, the adoption tax credit of $13,400 would be eliminated, though only 1% of 1.6 million babies born out of wedlock are adopted but 50,000 children in foster care were adopted.

A fifth immorality is that the House bill would eliminate the deduction for state and local income taxes, which are mainly paid by people in high tax Democratic states such as California, New York and New Jersey. That requires people in low income states like Mississippi and Alabama, which are Republican - to subsidize higher income states. Republicans who control Congress and the White House are sticking it to Democrats in big spending states.

What this overlooks is the fact that many federal programs, such as farm subsidies, welfare, Medicaid and federal highway construction are paid by the high income states for the poorer ones. Taxpayers earn more in the affluent East and West Coasts and therefore pay higher taxes and have fewer needs, so they subsidize America's lower income states.

The House bill will undoubtedly be changed before it is passed, and many Senators are pressing for quite a different bill in the Senate.

However, the House bill as it stands is immoral at five levels.

  • First, it would increase the federal deficit by $1.7 trillion over the next decade, forcing our children and grandchildren to pay for goodies to today's taxpayers.
  • Second, those benefits would primarily reduce taxes of the very rich, such as the estate tax paid by only 0.2 percent of taxpayers. It would eliminate the Alternative Minimum Tax, forcing the rich to pay some federal taxes. And cutting corporate tax rates would benefit stockholders - not workers.
  • Third, taxes are increased on the poorest Americans.
  • Fourth, important tax deductions would be eliminated for medical expenses, college tuition and debt, and adoption.
  • Fifth, state income taxes could not be deducted - hurting Democratic states.

Such an immoral bill must be defeated.


Copyright (c) 2017 Michael J. McManus, a syndicated columnist and past president of Marriage Savers. For previous columns go to Hit Search for any topic.

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