Replies to post #275494 on Tornado Alley (PROG)

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The Republican tax bill will exacerbate income inequality in America
https://www.vox.com/policy-and-politics/2017/12/2/16720952/senate-tax-bill-inequality

As Emmanuel Saez and Gabriel Zucman, economics professors at the University of California Berkeley, wrote:

Republicans will noisily claim that cutting taxes on wealthy business owners will boost economic growth and end up benefitting workers down the income ladder. The idea is that if the government taxes the rich less, the wealthy will save more, grow U.S. capital stock and investment, and make workers more productive. The evolution of growth and inequality over the past three decades makes such a claim ludicrous. Since 1980, taxes paid by the wealthy have fallen dramatically and income at the top of the distribution has boomed, but gains for the rest of the population have been paltry. Average national income per adult has grown by only 1.4 percent per year—a poor performance by both historical and international standards.

As a result, the share of national income going to the top 1 percent has doubled from 10 percent to more than 20 percent, while income accrued by the bottom 50 percent has been almost halved, from 20 percent to 12.5 percent. There has been no growth at all in the average pretax income of the bottom half of the population over the past 40 years—during which trickle-down enthusiasts promised just the opposite. Now they’re doing it again. Will we listen?

And if you step back and look at the ways the Republican tax bills could reshape American society and the world, the risks for deepening inequality rise.

It starts, as always, with the massive corporate tax cut at the heart of the bill. The global implications are profound, Saez said in an email.

“At the global level, it implies that the US has renounced the idea of taxing multinationals properly. It will accelerate the trend toward lowering corporate tax rates around the world,” he said. “This means that the gains from globalization will skew even more toward wealthy multinational shareholders instead of the public. This is the reverse of what we need at a time of populist backlash against inequitable gains from globalization in advanced economies.”

Then you have tax changes that affect Americans before they ever file a tax return, “Less noted is the potentially growing effect that the legislation could have on pre-tax income inequality, which is to say the amount people earn,” Jason Furman, who led the Council of Economic Advisers under Obama, told Vox.

Republicans want to end tax breaks for students and universities. The bill will increase the federal deficit, which will put pressure on future Congresses to cut spending on programs that benefit the poor and middle class. States and cities, with the end of the federal tax deduction for their taxes, could cut also programs and hike their taxes in such a way that they hit people with lower incomes. Republicans are also rolling back the estate tax, which will help the wealthiest families remain permanently at the top.

Furman summarized five ways the Republican tax bill could, beyond the obvious, deepen inequality:

1. Raising taxes on students, universities and training would have a disproportionate impact on access to more moderate-income students, reducing their upward mobility.

2. At the same time, estate tax cuts or repeal would further expand the opportunities of the most affluent.

3. Reducing or eliminating the state and local tax deduction would lead many states to cut taxes and with them cut services like education, training and the like that help to boost incomes and reduce inequality. States and localities could also shift more of their tax base to more regressive sales taxes.

4. The larger federal deficit will come at the expense of other government transfers for middle/bottom households and/or programs like education, nutrition assistance and Medicaid that have all demonstrated a tremendous impact on upward mobility.

5. More speculatively, cutting the tax rate on monopoly profits could help reduce competition with further consequences for inequality and growth.

As for Trump’s forgotten people, they are still left behind.