President Donald Trump and the Republican Congress finally have produced the outline of what they are calling a tax reform proposal. However, it is just more of the same-old, same-old that Republicans have been espousing for the past 30 years, benefiting millionaires, billionaires, and large corporations significantly, while blowing a huge hole in the deficit.
The Trump proposal will wreak havoc on the economy, not only because by increasing the deficit significantly, it will add to inflationary pressure, but also because it calls for doing away with deductions for state and local taxes. By taking money out of the pockets of many middle-class and upper middle-class taxpayers who rely on that deduction, two things will happen: Consumer spending will decline and the housing market will take a huge hit, especially in states such as New York, California, and Massachusetts. This is the sort of wrong-headed proposal that comes about as close as possible to a government policy that intentionally causes a recession.
The Republicans say that slashing corporate tax rate from 35 to 20 percent will lead to more jobs being created. The fallacy with that argument is that unemployment already is at record lows. Moreover, although corporations have been enjoying record profits for many years, they are not investing in new plants and creating more jobs. Rather, they are pocketing their huge profits and either buying back their stock (which increases their stock price) or increasing their dividends. And guess who benefits from those two strategies? You guessed it, the ultra-rich, who own most of the stock of public companies and who receive 70 percent of all the dividends that are paid out in this country.
Trump and the Republicans are playing a game of reverse-Robin Hood. The rich will get richer and, when the deficit inevitably grows hugely, these same Republicans will be calling for cuts in government spending on the social welfare safety net programs such as Medicaid and Social Security.
In short, the GOP/Trump tax plan threatens the very foundation of our democracy — and that is NOT an overstatement. Or, to put it another way, Trump and the Republicans are giving the ultra-rich all of the cake and icing, while the rest of us will be lucky if we get a few of the crumbs left over on the platter.