‘Sunset’ corporate cuts
The “middle-class tax cut” Christmas gift isn’t; it favors high-incomers. More than 90 percent of new U.S. wealth trickles up to the wealthiest – their taxes rise; hard to sympathize. An analysis of our president’s 2005 return indicates that he would have paid $31 million less tax under this new scheme, largely due to elimination of the AMT (Alternative Minimum Tax), which was enacted precisely to counter loopholes available only to high-incomers.
I’m a fixed-income retiree; my proposed “tax cut” is an 8.2 percent increase due to elimination of personal exemptions, property taxes, medical and other itemized expenses, and I reject paying more so a high-incomer can pay $31 million less. As for trickle-down economic benefits of wealthy windfalls, see Nick Hanauer’s 2014 TED talk (ted.com/talks/nick_hanauer_beware_fellow_plutocrats_the_pitchforks_are_coming). His point is that he makes 1,000 times the median U.S. wage, and just bought two pair of slacks, not 2,000 pair of slacks; little of his income expands the real economy.
Speaking in favor of “tax cuts,” Rep. Kevin McCarthy, R-Calif., told Face the Nation that the middle class shouldn’t mind paying more taxes, since it will help corporations grow the economy. Because of deductions, my current effective tax rate is 6.3 percent less than my tax bracket – just like some large U.S. corporations, in the 35 percent bracket, already pay at effective rates below the 20 percent rate proposed. Their windfalls may not improve the economy either; when a recent tax holiday allowed corporations to return billions to the U.S., they used it to pay investors, buy back company stock and increase CEO pay, while reducing jobs. Small Business is on record opposing this tax cut. Unemployment is already low with millions of jobs unfilled.
Most of the proposed “tax reforms” are permanent, and projected to add trillions to the deficit (like 2001 Bush tax cuts did), despite Congress reducing expenses by authorizing $1.3 trillion in cuts to Medicare and Medicaid in their latest budget resolution. To counter losses in tax revenues, proposed middle-class tax cuts will “sunset” after five years. To support corporations and reduce trillions added to the deficit, perhaps high-incomers wouldn’t mind “sunsetting” elimination of AMT and estate tax (calculated on estate amounts exceeding $5.5 million), which would reduce deficit bigly and put some of high-incomers’ stashed cash back in circulation.
The vast majority of U.S. businesses are “pass-through” entities, with a proposed 20 percent tax rate. This incentivizes employees with six-, seven- and eight-digit incomes, in tax brackets up to 39.6 percent, to become contractors at the 20 percent rate instead. They’d have to pay for their own benefits, but some would be deductible, along with commuting and other work expenses. Their employers would save money, too. So it’s a win/win, except there’d be less tax revenues, higher deficits, less money paid into depleted Social Security and Medicare funds, and high-income contractors might be in a lower bracket than some of us pensioners.
Bottom line: For Christmas, keep the AMT, estate tax and top bracket for individuals; and “sunset” the corporate cuts if they don’t add better-paying jobs and increase employee pay to a living wage. We have a consumer economy, with too few consumers. Businesses don’t expand operations unless there’s increasing demand for products and services; they could learn from Henry Ford who increased wages so his employees could buy his cars; sales soared. If Congress wants U.S. businesses to be more competitive in the world economy, they could eliminate employee health care insurance expense by enacting Universal National Health, reducing U.S. health care expense by 50 percent.