My Turn: No, the tax bill will not help most of us

For the Monitor
Saturday, December 30, 2017

Joseph Mendola celebrates President Donald Trump’s new tax bill as having kept his campaign promise to working people, while pointing to recent low GDP (gross domestic product) growth rates and blaming former President Obama for “income inequality” (Monitor Forum, Dec. 22). He believes that the new law encouraging repatriation of offshore profits will enhance growth and create more and higher wage jobs, and that “average savings” for 80 percent of Americans could be about $2,100. The reality of the situation is something quite different than what they say.

Fact No. 1: Obama and the Democrats did not create low growth and “income inequality.” Historical data show that in the post-war era, Democrat administrations averaged 3.6 percent real GDP whereas Republicans averaged 2.6 percent. The highest recent growth was under Bill Clinton, who balanced the budget and created a $60 billion net surplus. Obama, however, inherited the Great Recession (caused by trade imbalances, lax lending standards, high household debt and real-estate bubbles) and worked hard to prevent it from becoming another Great Depression. What he did worked, and the economy is now growing at more healthy rates, albeit lower than the nation’s post-war average.

“Income inequality” is a multi-decades-old problem, due largely to a changing world: international competition, obsolete jobs, the weakening of unions, the growth of robotics and artificial intelligence, and the shuttering of outdated energy operations. Additionally, we cannot ignore the role of corporations and the wealthy whose dollars seem to have more say in government than the votes of the people.

Fact No. 2: The new tax code does not benefit most mainstream Americans as advertised. In fact, the same data used to suggest that “average savings” for 80 percent of Americans could be about $2,100 also shows that the average savings for the poorest 70 percent of all tax filers is only $450 – an added $8.65 per week (i.e., a couple of Big Macs). By contrast, the predicted savings for the other (richest) 30 percent of tax filers is about $4,400 (i.e., real savings). So, while it returns minor amounts back to the pockets of Americans, the law is not permanent and it does not affect the major problem that 70 percent of tax-filers have which is the inability to save money for emergencies and for retirement.

Without substantial savings, the increasing costs and exigencies of old age can put the average American couple at serious financial risk. For example, at age 96, my mother-in-law had lived on $35,000 for most of her retired years. When she got seriously ill, her costs skyrocketed to more than $85,000 per year. Fortunately, she and her husband had saved enough to have a financial cushion. She could still pay her bills and not depend on Medicaid and The State to support her. Most of “the 70 percent” do not have this luxury.

Fact No. 3: It is a myth that repatriation of offshore profits, taking advantage of a massive tax cut for the rich, will lead to more wealth for “working people.” Just Google it and compare the research to the rhetoric. Simply put, “trickle-down” economics has never worked, and even the government agencies charged with doing the official projections do not believe that this tax bill will pay for itself through the creation of substantial growth. Further, occasional bold headlines notwithstanding, corporations plan to share repatriated funds with shareholders through dividends and stock buybacks (thus enhancing corporate bonuses!), not by giving permanent raises to workers. Even further, the huge deficits created by this tax bill will be used next as the argument to reduce Medicare and Medicaid, which constitute the safety net for “the 70 percent.”

Conclusion No. 1: Repeating Republican rhetoric that misconstrues the facts constitutes reaffirming their lies to the American people. It is simply not true that the new tax bill represents a significant benefit for most working taxpayers in this country.

Conclusion No. 2: President Trump has also clearly not kept his campaign promise to the working people of this country, but he has kept his promises to his wealthy donors. See the recent headline – “Trump celebrates tax bill with Mar-a-Lago Friends: ‘You all just got a lot richer!’”

(John Warner lives in Warner.)