You can always count on Republicans to do two things: try to cut taxes for the rich and try to weaken the safety net for the poor and the middle class. That was true under George W. Bush, who sharply cut tax rates on the top 1 percent and tried to privatize Social Security. It has been equally true under President Donald Trump; GOP legislative proposals show not a hint of the populism Trump espoused on the campaign trail.
But as a terrible, no good, very bad tax bill heads for a final vote, something has been added to the mix. As usual, Republicans seek to afflict the afflicted and comfort the comfortable, but they don’t treat all Americans with a given income the same. Instead, their bill – on which we don’t have full details, but whose shape is clear – hugely privileges owners, whether of businesses or of financial assets, over those who simply work for a living.
And this privileging of nonwage income isn’t an accident. Modern Republicans exalt “job creators,” that is, people who own businesses directly or indirectly via their stockholdings. Meanwhile, they show implicit contempt for mere employees.
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More about that contempt in a moment. First, about that tax bill: The biggest-ticket item is a sharp cut in corporate taxes. While some of this tax cut might trickle down in the form of higher wages, the consensus among tax economists is that most of the break will accrue to shareholders as opposed to workers. So it’s mainly a tax cut for investors, not people who work for a living.
And the second most important element in the bill is a tax break for people whose income comes from owning a business rather than in the form of wages. The nonpartisan Tax Policy Center has evaluated the Senate bill, which the final bill is expected to resemble. It finds that the bill would reduce taxes on business owners, on average, about three times as much as it would reduce taxes on those whose primary source of income is wages or salaries. For highly paid workers, the gap would be even wider, as much as 10 to 1.
As the Center’s Howard Gleckman notes, this might mean, for example, that “a partner in a real estate development firm might get a far bigger tax cut than a surgeon employed by a hospital, even though their income is the same.” (Yes, a lot of the bill looks as if it were specifically designed to benefit the Trump family.)
If this sounds like bad policy, that’s because it is. More than that, it opens the doors to an orgy of tax avoidance. Suppose that I could get The Times to stop paying me a salary, and instead to pay the same amount to Krugmanomics LLC, a consulting firm consisting of one person – me – that sells opinion pieces. I would probably get a big tax break as a result.
Now, the bill will contain complicated rules intended to limit such gaming of the system, and they’ll probably prevent me personally from taking advantage of the new loophole. But as Gleckman says of these rules, “some may fail and some may work too well” – that is, deny the tax break to some business owners who really should qualify. On average, however, they’re likely to fail: a lot of revenue will be lost to those who game the system. Think about it: We’re pitting hastily devised legislation, drafted without hearings over the course of just a few days, against the cleverest lawyers and accountants money can buy. Which side do you think will win?
As a result, it’s a good guess that the bill will increase the budget deficit far more than currently projected. And meanwhile, after all those promises Republicans made about simplifying our tax system, they’ve actually made it far more complicated.
So why are they doing this?
After all, the tax bill appears to be terrible politics as well as terrible policy. Cutting corporate taxes is hugely unpopular; even Republicans are almost as likely to say they should be raised as to say they should be lowered. The Bush tax cuts, at least initially, had wide (though unjustified) popular support; but the public overwhelmingly disapproves of the current Republican plan.
But Republicans don’t seem able to help themselves: Their disdain for ordinary working Americans as opposed to investors, heirs, and business owners runs so deep that they can’t contain it.
When I realized the extent to which GOP tax plans were going to favor business owners over ordinary workers, I found myself remembering what happened in 2012, when Eric Cantor – then the House majority leader – tried to celebrate Labor Day. He put out a tweet for the occasion that somehow failed to mention workers at all, instead praising those who have “built a business and earned their own success.”
Yes, it was just a gaffe, but a revealing one; Cantor, a creature of the GOP establishment if ever there was one, had so little respect for working Americans that he forgot to include them in a Labor Day message.
And now that disdain has been translated into legislation, in the form of a bill that treats anyone who works for someone else – that is, the vast majority of Americans – as a second-class citizen.