Republican Tax Plan to increase inequality

Republicans, finally on Wednesday, December 20, 2017 muscled the most sweeping rewrite of the nation’s tax laws in more than three decades through the GOP-led House and Senate with a dozen GOP Congressmen voting against their own Bill, giving President Trum his biggest and first ever legislative victory.

The vote, largely along party lines in the House was 227-203, while in the Senate was 51-48, which capped a GOP sprint to deliver a major legislative accomplishment to President Donald Trump after a year of congressional stumbles and non-starters.

This bill is a massive handout to corporations and the wealthiest among us at the expense of average tax payers. Every independent analysis, including the Tax Policy Center, has determined that the vast majority of benefits will go to the top 1% of earners – like President Donald Trump himself. This bill will increase the already out of control income inequality in the country. Need more proof? The paltry tax credits to middle and lower income earners expire after 10 years while corporate tax cuts are permanent.

The massive $1.5 trillion package would touch every American taxpayer and every corner of the U.S. economy, providing steep tax cuts for businesses and the wealthy, and more modest tax cuts for middle- and low-income families. It would push the national debt ever higher.

Democrats called the bill a giveaway to corporations and the wealthy, providing little if any tax help to the less-than-well-to-do and no likelihood that business owners will use their gains to hire more workers or raise wages.

And the Republicans’ contention that the bill will make taxes so simple that millions can file “on a postcard” — an idea repeated often by the president — was simply mocked.

“What happened to the postcard? We’re going to have to carry around a billboard for tax simplification,” declared Rep. Richard Neal of Massachusetts, the top Democrat on the Ways and Means Committee.

Tax cuts for corporations would be permanent while the cuts for individuals would expire in 2026 in order to comply with Senate budget rules. The tax cuts would take effect in January. Workers would start to see changes in the amount of taxes withheld from their paychecks in February.

The standard deduction used by most families would be nearly doubled, to $24,000 for a married couple, while those who itemize would lose some deductions.

The Republicans went ahead with the Bill with over two-thirds of the nation still disapproving of it. House Speaker Paul Ryan dismissed criticism of the widely unpopular package and insisted “results are what’s going to make this popular.” The Republican tax bill is an audacious attempt to accelerate the economic trends of the last half-century.

Over the last few decades, the rich have not only enjoyed the largest pre-tax raises, by far. They have also received big tax cuts. The middle class and poor, meanwhile, have suffered from slow-growing incomes — and from overall tax rates that are higher today than in the mid-1960s. The second part of the story is less known. But it’s also crucial. The great tax-cutting revolution of the last half-century hasn’t actually been a tax-cutting revolution for most Americans. The middle-class and poor families now face higher total tax rates than a half-century ago.

Now the GOP tax plan is expected to widen inequality even further. Their tax bill doesn’t touch the payroll-tax rate — again, the single biggest tax that most households pay. The bill does cut income taxes for the middle class, but only modestly and only temporarily. The tax cuts benefiting the wealthy, including cuts to the inheritance tax and the corporate tax, are much larger and permanent.

The Tax Policy Center has estimated the long-term effects of the Tax plan on each income group with the tax bill amounting to an enormous effort to increase inequality.

The scoop of the weekend seems to have come from International Business Times, which reported that the final version of the Republican tax bill contains a real-estate provision that could enrich President Trump and multiple members of Congress. President Obama, on the other hand, made reducing inequality his top domestic priority. He kept the Bush tax cuts on the middle class and poor but not the rich. His health care law increased taxes on the affluent to pay for better medical care for the non-rich. Barack Obama, when he was President, called rising inequality “the defining challenge of our time.”

By redistributing money from richer households to poorer households, progressive tax systems can moderate the level of inequality in post-tax income. However, the 2017 GOP Tax Bill showers most of its goodies (tax cuts) on the richest people in the country while doing little for poor and middle-income households.

Since the past tax cuts by President George Bush and President Ronlad Regan, income inequality has continued to rise in the nation. The gap between the “haves” and “have nots” is widening, according to the latest data out this week.

The rich are money-making machines. Today, the top mega wealthy — the top 1% — earn an average of $1.3 million a year. It’s more than three times as much as the 1980s, when the rich “only” made $428,000, on average, according to economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman.

Meanwhile, the bottom 50% of the American population earned an average of $16,000 in pre-tax income in 1980. That hasn’t changed in over three decades. Millennials, born in the 1980s, only have a 50% likelihood — a coin toss chance — of earning more money than their parents did, according to research released by the Equality of Opportunity Project.

Over time, the rich became more lucky — or more greedy. Today the top 1% take home more than 20% of all U.S. income. As the wealthy earned more, someone else in America had to get less. The bottom 50% went from capturing over 20% of national income for much of the 1970s to earning barely 12% today. The turning point started around 1980, as seen in the graph below. By the mid-1990s, the fortunes of the top 1% were clearly on the rise and those of the bottom half were declining rapidly.

During the last several decades, income inequality in the United States has increased significantly — and the trend shows no sign of reversing. The last time inequality was as high as it is now was just before the Great Depression. Such a high level of inequality is not only incompatible with widely held norms of social justice and equality of opportunity; it poses a serious threat to America’s economy and democracy.

The current tax plan by the Republicans will sure to add to the already growing disparity of income and the poor and the middle class are bound to stagnate or become poorer while the rich and the multi-national corporations will continue to grow and amass more wealth at the cost of the poor.

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