It’s time to drive a stake through the heart of President Trump’s and Republicans’ misleading assertion that their tax cuts are for the middle class and for workers. These tax cuts are overwhelmingly designed to help the rich, to further comfort the already very comfortable.
If the tax plan were truly a plan for the middle class and not a plan for the rich, it wouldn’t lavish nearly as many benefits on the wealthiest Americans: phasing out the estate tax, eliminating the alternative minimum tax, cutting the business pass-through tax rate. The Trump-GOP plan would also chop the corporate income tax rate from 35% to 20% – a move that heavily favors affluent people because they own a disproportionate share of corporate stocks.
The GOP plan does include some measures that will help many middle-class Americans, like doubling the standard deduction and modestly increasing the child tax credit, but in truth those measures do little to undo the huge tilt toward the rich.
According to the Institute on Taxation and Economic Policy, the richest 5% of households will receive 61% of the tax cuts in 2027 under the House plan. The middle fifth of households would get 8% of the cuts, just one-sixth of the 48% share going to the top 1%. The bottom 60% of Americans would get just 14% of the cuts in 2027, less than a third of what the top 1% gets. Does that seem like a plan for the middle class and for workers?
The Joint Committee on Taxation found that, on average, households earning between $20,000 and $40,000 would end up paying more, not less, under the House GOP plan. Several analyses have found that between 25% and 45% of middle-class Americans would ultimately pay more, not less, under the tax plan. How can this be a tax cut for middle-class Americans if so many middle-class Americans will be facing tax increases instead of tax cuts?
When House Republicans were searching for revenues to keep the national debt from soaring by more than $1.5tn, they repeatedly targeted benefits enjoyed by millions of middle-class Americans. The House plan would eliminate the adoption tax credit and deductions for student loans, medical expenses and moving costs. Instead of wiping out those benefits for the middle class, House Republicans could have scaled back the windfall for the rich, for example, by preserving the estate tax or by cutting the corporate income tax less. Or in its search for revenues, the GOP could have gone after a tax break for the ultra-rich that Donald Trump vowed to eliminate – the carried interest loophole that enables many hedge-fund billionaires to pay lower marginal tax rates than many middle-class Americans.
There’s a lively debate about the $2tn in planned corporate tax cuts, with many conservatives maintaining that most of that money will go to workers’ wages. The stock market evidently disagrees. Would investors bid up stock prices so much if they expected lower corporate taxes to translate into tons of money for increased wages. No, investors expect those cuts to mean higher profits and dividends.
Corporate America’s profits have been at or near record levels in recent years, but wages have remained largely stagnant, with the labor share of national income falling to record lows.
It’s a total mystery – and defies logic – why cutting the corporate income tax would make profit-maximizing companies suddenly change course and share far more of their profits with workers in the form of wage increases.
President Trump has promised that cutting corporate income taxes will fuel job creation. Cutting corporate taxes should spur at least some increased investment in the US, but let’s not forget that American corporations have been sitting on $2tn in cash for years, and have seemed far more interested in investing in lower-wage countries overseas than in the US. Let’s be frank, these corporate tax cuts are likely to prove a windfall for shareholders while producing merely marginal gains for wages and jobs.
If Trump truly wants corporate tax cuts to help workers, he can set some conditions. For instance, corporations wouldn’t qualify for the lower rates unless they agreed to pay a minimum wage of, say, $12 or $15 an hour, and at least $3 more per hour for any worker with at least 10 years on the job.
Or the tax law could state that CEOs can’t receive a pay increase of more than 10% unless every worker in their company receives a raise of at least the inflation rate plus 1%. There can be plenty of variations on that theme.
If President Trump is serious about creating middle-class jobs, there are better ways than praying that cutting corporate taxes will somehow trickle down and create good jobs. A far surer way of creating good jobs would be to push full speed ahead on rebuilding our ailing infrastructure. If the US devoted $1tn to roads, bridges, airports and rail, that could create one million jobs.
Most of those would be middle-class jobs with good pay and benefits – the exact type of jobs that the president and many blue-collar Americans complain have been disappearing.
If the goal is to create good, middle-class jobs, spending on infrastructure would be far more effective than lavishing big tax breaks on the rich. And unlike tax breaks for the rich, it could also do wonders for our decaying roads, bridges and airports.
- Steven Greenhouse was a reporter with the New York Times for 31 years and continues to write about labor and workplace issues