Tax Cuts and Republican Economic Mythology

Republican propaganda surrounding their partisan tax plan pushes the notion that when rich people have more money they’ll invest and create more jobs, going so far as to call the bill the Tax Cuts and Jobs Act. If you own or manage a business you know that’s just not true. Generally greater profits end up mostly if not completely in the hands of the company owners. Some few forward thinking folks will do some form of profit sharing so that their employees will get a little of the extra profit but that’s a small minority. No business creates jobs just because they have more profit, they only create more jobs if there is more demand.

Only demand for goods and services create jobs, if there is no one with both the desire for your product and the money to pay for it no business owner in their right mind adds to their payroll. So, if Republicans really wanted to create jobs using tax cuts they’d make sure that those cuts went to the folks most likely to spend those extra dollars which actually increase demand and create jobs which in turn generates more taxes. Instead 60% of the tax cuts will go to the top 10% of earners who rather than spending it will most likely invest it in the stock market which is nice for your 401k or Mutual Fund IRA if you’re among those fortunate enough to have one but it won’t put money in your pocket right now.

In case you think there is no proof, just look at Reagan and the first Bush, after Reagan’s tax cuts early in his term then when the economy didn’t take off he had to repeatedly raise taxes in order to avoid increasing the deficit. What’s worse is while his tax cuts largely benefitted the very wealthy his tax increases were felt mostly by the middle class.

This is all Economics 101 and either congressional Republicans know that and are willfully lying or they’re stupid. I’ll leave it to you to decide which is more likely.

Senator Chuck Grassley of Iowa pushed back when questioned about the merits of  eliminating the tax on estates valued at more than $5 million stating “I think not having the estate tax recognizes the people that are investing, as opposed to those that are just spending every darn penny they have, whether it’s on booze or women or movies.” I don’t know about you but I find that offensive coming from a guy who last worked a job like average Americans hold in 1959 when an assembly line job like he held paid well enough to buy a house, a car and raise a family.

Today that assembly line job barely pays enough for a family of four to cover rent, food and medical care. Even when both adults work full time most families just don’t earn enough to save millions of dollars as Grassley seems to think. Throw in a few recessions and a health crisis or two over the course of 30 years and a lot of us can’t manage to pay for our children’s college education without student loans.

As economist John Kenneth Galbraith pointed out long ago, "The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."

It’s not too late to call Senators Cruz and Cornyn to let them know they’re tax plan is bad for most Americans and you’re not happy about it.

Published in the Seguin Gazette - December 15, 2017

Tax Breaks for Billionaires Bad for You and Me

If Republicans have their way on the tax plan they’ve proposed you and I will end up subsidizing tax breaks for billionaires. The bill eliminates deductions that you and I use when we suffer major losses like fires and floods or medical costs due to life threatening illness in order to drop the corporate tax rate from 35% to 20%.

Teachers in Texas are already underpaid, schools are underfunded and this terrible tax plan takes away the deduction teachers can now take for supplies they purchase for their classrooms out of their own money.

Texans hospitalized for life threatening illnesses like cancer, heart attacks or severe infections will be further harmed by losing the deduction for major medical expenses.

The Republican tax plan hurts struggling students and recent college graduates by eliminating the student loan interest deduction. Current rules allow borrowers paying off education loans can deduct up to $2,500 of interest paid on student loans.

The Republican proposal hurts families with four or more children doing away with the dependent exemption, which provides $4,050 for each qualifying dependent and replacing it with a child tax credit to $1,600. They are also calling for a new $300 credit for each parent and non-child dependent, but this tax break will expire by the end of 2022.

What’s worse is that even with all that and more passing the bill would cause the federal deficit to increase by $1.5 trillion because they can’t eliminate enough deductions to pay for the huge tax breaks being offered to big business. Unlike the extra $300 child tax credit the corporate tax break doesn’t expire.

Big business is raking in record profits, they don’t need a tax break. Republicans claim that if businesses get a tax break they’ll raise wages and salaries but it didn’t work for Ronald Reagan in the 1980’s, or under Bush in the early 2000’s, and it didn’t work in Kansas this decade where Gov. Sam Brownback’s tax cuts did so much harm to the economy the Republican state legislature had to override him in order to restore services.

This tax plan does nothing to raise wages and will in fact harm the economy by taking money out of the hands of people who will spend it and putting in the hands of those who already have so much they’ll save it. The only way to expand the economy and raise wages is to increase demand and this tax plan does exactly the opposite.

Every day somewhere in the United States a bridge collapses forcing people to use a longer route. Every day many new potholes open up damaging tires and suspensions. Every day all over America millions of drivers sit in stop and go traffic costing them time and money. All these problems also cost business in lost efficiency and therefore profits. Instead of giving big business and billionaires more tax breaks we ought to be spending money on repairing our roads, replacing aging bridges, building new schools and replacing other city infrastructure like water and sewer lines many of which are so old they leak or are unsafe.

If we spend our money on replacing infrastructure both citizens and businesses benefit. Putting people to work will raise demand for workers and give those workers money to spend in store creating demand for yet more workers. That increase in demand for workers is what will cause wages and salaries to rise and improve the lives of all of us not just the billionaires.

Published in the Seguin Gazette - November 10, 2017