Trump’s Tax Bill And Our Oligarchy
The Tax Cut and Jobs Act has exposed American democracy for the sham it is.
The Tax Cut and Jobs Act has exposed American democracy for the sham it is.
The Congressional Research Service (CRS) just released a new report detailing the effects of the Tax Cuts and Jobs Act (TCJA), “the biggest overhaul to America’s tax system in more than 30 years” according to The Economist, which was pushed through Congress and signed by President Trump in late 2017. As Matthew Gardner, corporate tax expert and Senior Fellow at the left-leaning Institute on Taxation and Economic Policy (ITEP), noted, “This new report is the most comprehensive assessment yet undertaken by the CRS, which has an unimpeachable reputation as an impartial arbiter of policy disputes.”
The report provides yet more evidence that the tax bill was, at its core, an act of class warfare by the wealthy against the majority of the country. It finds that the tax bill did little to spur growth either in wages or GDP, but did a great deal to cut wealthy Americans’ taxes and worsen the federal deficit. In Vox, Dylan Scott singled this quote out as “the key sentence from CRS”:
From 2017 to 2018, the estimated average corporate tax rate fell from 23.4% to 12.1% and individual income taxes as a percentage of personal income fell slightly from 9.6% to 9.2%.
The fact that “[t]he tax law’s most enduring feature is a $1 trillion permanent corporate tax cut” points to who really won as a consequence of the tax bill. The windfall from the corporate tax cut, which dropped the corporate tax rate from 35% to 21%, has largely gone to the wealthy.
A 2018 analysis, for example, which looked at 145 companies that pledged to use savings from the tax cut to help workers, found that only 6% of these companies’ tax cut money went to workers and 18% went to job growth. Meanwhile, 56% of the money went to shareholders. Shortly before the tax bill was passed, a paper came out showing that the richest tenth of Americans own over 80% of all stocks. More money for shareholders, then, really means more money for the rich.
Another analysis, covered by CBS, disproved claims that the corporate tax cut would help ordinary Americans by spurring wage growth, revealing that real wages actually fell by 1.3% in 2018. When given a choice between stock buybacks and raises for employees, corporate America much prefers the former, which overwhelmingly reward rich shareholders and reached a record high of over $1 trillion last year, up 48% from 2017.
The data from this new CRS report should be unsurprising to those who have kept up on news regarding the results of the TCJA since late 2017. For instance, a December 2017 analysis of the tax bill covered in Vox forecasted “nearly two-thirds of the benefit going to the richest fifth of Americans in 2018.” It added that because the corporate tax cut is one of the few measures that stays in place after 2025, by 2027 the top one percent will reap 83% of the bill’s benefits while 53% of Americans will pay increased taxes.
ITEP’s work has shown that, as a result of the TCJA,
the top 1 percent of earners received an average tax cut equal to 2.6 percent of their income in 2018, or $48,320 per household. In the middle of the income distribution, the cut was just 1.6 percent of income, or $810. And at the bottom, tax cuts under the TCJA averaged just 0.9 percent of income, or $120. For a low-income family, that works out to a boost in income of about $2.31 per week.
The evidence is in: the TCJA was a major success for Trump’s core constituency, the wealthy elite. As for everyone else, they will likely end up bearing the burden of the increased deficit wrought by the TCJA. A quote from a recent report by Americans for Tax Fairness exposes this reality:
President Trump’s 2020 budget shows that he plans to tackle the ballooning deficit due to his tax cuts by slashing Medicare, Medicaid, the Affordable Care Act, education and most other critical services for working families, rather than by reversing the tax windfall he gave to the wealthy and corporations. In fact, he wants to double down on his tax cuts that expire in 2026, by extending them at a cost of $1 trillion. Senate Republican leaders have called for similar attacks on services for working families by proposing to slash Social Security, Medicare and Medicaid.
The tax bill, it seems, might have simply been the first step in a grand plan by the Grand Old Party to first enrich the wealthy and then screw the rest of the country. While having no problem blowing a hole in the deficit to enrich the wealthy, Republicans are now feigning concern over the deficit in order to gut programs that benefit ordinary people.
Reflecting on the broader story of the tax bill, it quickly becomes clear that the bill is merely the latest evidence that we as Americans do not live in a democracy. Rather, we reside in a nation with a political system much more closely resembling an oligarchy. Remember that, around the time that Trump signed the tax bill, support for the bill among the general population sat at under 30%. The bill passed only after wealthy elites waged a major campaign to push it through Congress. As was reported in Mother Jones,
In late June 2017, Texas political mega-donor Doug Deason had a stern message for Republicans seeking campaign donations: The “Dallas piggy bank” was closed until they repealed Obamacare and passed major tax cuts. Deason said he had urged about two dozen of his wealthy Texas friends to do the same. The billionaire Koch brothers Charles and David also hinted at withholding money.
Just weeks later, the GOP effort to repeal Obamacare collapsed. Tax reform, which one Republican senator said would make repealing Obamacare look like a piece of cake, ominously loomed as the next item on the GOP agenda, and time was running out. Panic set in. By November, as Congress struggled to push a massive tax cut bill forward, Rep. Chris Collins from New York summed up the stakes: “My donors are basically saying: ‘Get it done or don’t ever call me again.’”
The donors’ strategy appears to have consisted of two steps: first, withhold campaign funds from Republicans until the tax bill is introduced in Congress; second, once the bill is introduced, open the floodgates to reward Republican politicians and re-tighten relationships with them, pressing these legislators on until the tax bill is signed into law. The second part of this strategy is also described in Mother Jones:
From the time the tax bill was first introduced on Nov. 2, 2017, until the end of the year, a 60-day period, dozens of billionaires and millionaires dramatically boosted their political contributions unlike they had in past years, giving a total of $31.1 million in that two months…
Most telling, say campaign finance experts, is that 25 wealthy donors gave all their 2017 money in the final two months of the year, the first time they did so during the previous four off-election years — 2009, 2011, 2013, 2015, according to the Center’s analysis of data collected by the Center for Responsive Politics.
Yet more strikingly, soon after the bill’s passage in the House, Republican mega-donor Charles Koch and his wife showered then-Speaker Paul Ryan’s joint fundraising committee with nearly $500,000 and the National Republican Congressional Committee with a similar amount. According to an analysis from Americans for Tax Fairness, “Charles Koch and David Koch and/or Koch Industries could save between $1 billion and $1.4 billion combined in income taxes each year from the Trump tax law.”
Knowing that sharp backlash could result from the tax bill if public perception remained that the bill’s benefits would flow mostly to the wealthiest Americans, corporate America went on the offensive. Republican politicians had already been lying about who would benefit from the tax bill, framing it as a tax cut for middle-class Americans rather than a tax cut first and foremost for corporations as well as, slightly less blatantly, a tax cut disproportionately favoring rich Americans. To these Republican lies, corporate America added a PR blitz after the passage of the bill. As reporter Adam Johnson documented in late February of 2018, the media essentially continually broadcasted corporate propaganda after the tax bill became law. Johnson observed,
[There has been a] nonstop deluge of stories over the past two months, cheerleading alleged “tax cut bonuses” from large corporations.
Democratic-leaning cable network MSNBC and its colleagues NBC, it should be noted, have mostly been the exception, avoiding the talking point for the most part. But Fox News, CNBC, Fox Business, CNN and dozens of local media outlets joined the messaging charge, singing the bill’s money-saving praises. Here is just a small sample:
— AT&T, Comcast Say GOP Tax Bill Will Mean $1,000 Bonuses for Employees (Washington Post, 12/20/17)
— AT&T to Pay $1,000 Bonus Due to Tax Cuts (BBC, 12/20/17)
— AT&T Giving $1,000 Bonus to Every Employee in the US When Trump Signs Tax Bill Into Law (Dallas Morning News, 12/20/17)
— AT&T Is Handing Out $1,000 Bonuses to Its Employees After Tax Bill Passes (Forbes, 12/20/17)
— The Best Way to Use a Tax Bill Bonus (CNBC, 12/22/17)
— Bank of America Is Giving Some Employees a $1,000 Bonus, Citing Tax Bill (CNBC, 12/22/17)
— American Airlines to Give Employees $1,000 Bonus to Share Tax Reform Benefit (Dallas Morning News, 1/2/18)
— American and Southwest Airlines Promise ‘Tax Bill Bonus’ for Employees (Fortune, 1/3/18)
— Alaska Air Employees Will Get $1,000 Bonus Due to Tax Overhaul (Seattle Times, 1/5/18)
— List of Companies That Paid Bonuses or Boosted Pay Since Tax Bill Passed (USA Today, 1/11/18)
— Some of the Companies Giving Out Raises and Bonuses Because of Tax Reform (CNN, 1/11/18)
— Home Depot to Give Hourly Workers One-Time Bonus of Up to $1,000 in Cash (AP, 1/25/18)
— Lowe’s to Pay US Staff $1,000 Bonus Following Tax Reform (Reuters, 2/1/18)
The degree to which congressional Republicans and business leaders coordinated on this messaging — either directly or through trade organizations like the Chamber of Commerce — is unknown. But every element of the rollout reeks of public relations: exact same figure, exact same messaging, staggered announcements to keep the drumbeat going and the “$1000 Bonus!” headlines in the news. ($1,000 is such a nice, round, pseudo-large number, isn’t it?)
As Johnson remarked at the time, the reality is that those bonuses did not reflect much generosity from corporations, and at times were either diluted by certain caveats or used to undercut union demands. Newer data suggests that, on average, workers reaped only one or two extra cents per hour as a result of increased bonuses in 2018.
Yet this push by corporate America, aided by corporate media, to manufacture consent for the tax bill worked spectacularly. Support for the bill shot up among the American public, putting approval and disapproval numbers in dead heat for much of February 2018, with a short period of very slight net approval for the bill. The chasm between percent approval versus percent disapproval widened after February, with net disapproval fairly significant for most of 2018. In late 2018 and early 2019, the gap closed again, but more recently it has widened once more.
As the story of this corporate PR campaign implies, part of the problem with our current political system is the ability of a wealthy elite to not only control the actions of government but to control the opinions of ordinary people. With strong propaganda campaigns, like the one launched by corporations following the passage of the tax bill, wealthy elites undermine democracy by misleading the public. After all, as Americans demonstrated during the lead up to the war in Iraq, when fed a sufficient amount of propaganda, they are willing to believe and support just about anything.
In addition to the control of both narrative and the GOP by wealthy elites, there is the fact that the opposition, represented in electoral politics most significantly by the Democratic Party, has abdicated its responsibility in many ways regarding the tax bill. It’s true that Democrats voted in unison against the TCJA in December of 2017, but since then they’ve busied themselves with other issues rather than consistently attacking the tax bill.
Consider what happened in the 2018 midterms, for instance. Republicans decided against running on the TCJA since they understood that the more they had to defend the bill, the less support they would receive from ordinary people. Democrats apparently missed this point, as they decided to focus on healthcare rather than taxes during the midterms.
Even after Democrats regained control of the House after the midterms, they continued to focus their attention on subjects other than Trump’s tax bill. As was reported in The Hill in January 2019,
House Democrats’ approach on the tax law is expected to be more cautious than the actions Republicans took on ObamaCare after they took back the House in 2011. Republicans repeatedly held votes to repeal ObamaCare at the time, but Democrats are unlikely to hold a vote to do away with the entire tax law.
We should recall that although ObamaCare was generally popular for the first several months after its passage in 2010, Republicans succeeded in shifting public opinion to being mostly opposed to ObamaCare from 2011 to 2017. And ObamaCare is legislation ordinary people are likely more inclined to support than tax legislation that disproportionately favors corporations and the wealthy. Imagine if Democrats went on an offensive against the tax bill with the same aggression with which Republicans attacked ObamaCare.
Partly because of Democrats’ inaction, the tax bill, “which was the GOP’s proudest legislative accomplishment during the party’s two years of total control of Washington, has somehow been all but forgotten,” according to Dylan Scott. “[I]t’s remarkably anonymous major legislation from a self-promoter like Donald Trump.”
The story of the tax bill indicts our political system as oligarchical on three counts. One: The American people do not have the final say in government. They strongly opposed the tax bill in December of 2017; yet it passed. Two: Corporate America undermines democracy with propaganda and skewed narratives. Aided by Republican politicians and corporate media, wealthy elites warp debate in favor of their interests. Three: Due to a weak opposition party that is either unable or unwilling to focus sufficient attention on issues like the tax bill, ordinary people are left without a major party to champion them in government.
We must push for a more democratic system. And perhaps the most important step in doing so is pushing for a stronger opposition, one that is truly progressive and advocates for the empowerment of ordinary people. The fight for such an opposition is underway, but it’s far from won. In the end, the fight is up to all of us.