The GOP Tax ‘Reform’ Is Highway Robbery

The GOP Tax ‘Reform’ Is Highway Robbery

The GOP Tax ‘Reform’ Is Highway Robbery

This scam is a full-employment program for corporate lobbyists.


Having failed in their attempts to strip millions of people of their health insurance by repealing Obamacare, President Trump and the GOP Congress are moving on to their biggest priority: tax cuts for corporations and the rich. The plan is still being written, but Trump has already begun his push for it. And every part of the administration’s tax pitch is divorced from reality (a gentle way of saying it’s a lie and a fraud).

For example, their stated rationale for cutting corporate taxes is laughable. Republicans complain that US companies pay the highest tax rates in the world. If corporations had more cash on hand, they assert, they would invest that money and create jobs. Trump adds that lower taxes will convince companies to stop moving jobs abroad and start building things in the United States.

This is nonsense. For one thing, American corporations don’t pay the highest tax rates in the world. While the nominal top rate is 35 percent, the Government Accountability Office found that profitable large corporations paid, on average, an effective rate of just 14 percent from 2008 to 2012. The tax code is rigged to ensure that result: Federal revenue from corporate taxes has plummeted, from about 3.7 percent of GDP in the late 1960s to an average of 1.5 percent in recent years. Meanwhile, profits hit record highs last year, with the S&P 500 devoting a large percentage of those earnings to buying back stocks, paying dividends, and gobbling up their competitors. These companies are boosting their own stock prices and executive bonuses, not investing in job creation or long-term growth.

So corporations aren’t short on cash, and they won’t use tax breaks for new investments. Nor are they shipping jobs abroad because of the domestic tax burden; they are doing so to take advantage of cheap labor and weak environmental and consumer protections in other countries. Many use transfer pricing and a range of accounting tricks to dodge taxes by reporting profits abroad. Trump argues that we should allow them to bring that money home at a very low rate—but if the companies get it, their tax scam will have worked. They will use the money—as they did the last time the government allowed repatriation—primarily to buy back stocks, boost dividends, and pump up executive pay. And then even more companies will insist on repeating the scam in the future.

To test the GOP’s argument that lower tax rates create jobs, the Institute for Policy Studies looked at the record of profitable companies that paid a tax rate of 20 percent or less from 2008 through 2015. Those businesses were actually net losers of jobs.

Even Trump’s stated goal—revenue-neutral tax reform—is a scam. Republicans are interested in lowering tax rates on corporations and the rich; they are far less interested in closing loopholes to pay for those lower rates. This isn’t a strategy for reform; it’s a full-employment program for corporate lobbyists. Every loophole and tax dodge has a deep-pocketed special interest mobilizing to defend it. Republican candidates may benefit from the bidding war that ensues, but the public surely will not.

Even the bill-making process is perverse. Trump claims that he wants Democratic support, but there have been no discussions with Democrats toward drafting a bipartisan measure. Instead, it’s being cooked up by a small group of Republicans behind closed doors. Democrats will be invited to sign on or shut up. The plan is to pass the bill as part of a budget-reconciliation process that needs only GOP votes to pass.

This is the epitome of modern conservative governance. Trump and the Republicans want to slash spending and reduce the capacity of the government to serve the majority. By passing a tax scheme that does nothing to address the real challenges we face, they will contribute to their actual goal: discrediting government as an instrument of national purpose. It’s a decades-old plan, one made famous by Ronald Reagan when he asserted that the most terrifying words in the English language are “I’m from the government and I’m here to help.”

There are sensible tax reforms: Raise rates on the rich and use that money to rebuild infrastructure and accelerate the move to renewable energy. That would create jobs, reduce inequality, stimulate research and new technology, help capture growing global markets, and begin to address climate change. We should also tax income from investments at the same rate as income from work, and require global corporations to pay taxes at the same rates as domestic companies by ending deferral. And we should tax financial speculation to raise revenue and at least slow the destabilizing effects of casino capitalism. But it won’t surprise you to hear that these and other common-sense ideas are not being discussed by Republicans.

To echo Ronald Reagan, there are few words in the English language more terrifying than “A Republican president and Congress have announced that it’s time for tax reform.”

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