Why the Rich Are Getting Richer and the Poor Poorer
The 2017 Tax Cuts and Job Act (TJCA) really did a job on the American people. The results were predictable. A similar tax cut in Kansas in 2012 was a disaster for Kansas. It benefited the rich, led to a stagnant economy, took money from infrastructure and schools, and put Kansas far in debt. States cannot run a deficit, so Kansas finally had to make up for it in 2017 with the largest tax increase in Kansas history.
The TJCA was based on the trickle-down theory which, as experience has shown, increases public debt and makes the wealthy wealthier – at the expense of the middle class and low wage earners. The CBO estimated that the TJCA would increase the national debt by almost $1.9 trillion over the next 10 years. It cut the corporate tax rate from 39% to 21% and allowed companies to bring their intellectual assets (GILTI) back to the United States at an even lower tax rate. Those who profited the most were the wealthy and corporations, as it gave permanent tax cuts to corporate profits, investment income, inheritance taxes, estate taxes, and preferential tax treatment to pass-through income*. Some banks, for instance, will pay far less than the 21%. Some of the tax cuts went to the middle class, but they will sunset in 2025 while the tax breaks for businesses and corporations do not sunset.
What is better than lobbying? It is electing Legislators who the large corporations can depend on to cut their taxes. For Republicans, adding to the national debt has always been anathema. Sadly, it was a Republican President and Legislature who passed the TJCA. The chart above lists some of the corporations who donated heavily to Republicans who they could depend on to vote to cut their taxes. It also lists the amount they gained from the tax cuts. Those corporations received about a 6000% return on their investments in electing compliant politicians. Not bad, especially when your bank pays you about 2%. Not only that, but the New York Times reported that there were 55 very profitable companies, such as Nike, FedEx, and Duke Energy, that paid no taxes at all last year. Considering subsidies, some of them had an effective tax rate of as much as a -50%.
Also, the US subsidizes oil and gas companies so that investors never lose. Every year, the U.S. federal and state governments pour around $20.5 billion in subsidies into the oil and gas industry. New research, published in Environmental Research Letters, puts a value on the effect that the16 tax breaks and exemptions will have on the 1,000 U.S. oil and gas fields projected to be built before 2030. The paper found that if fossil fuel prices stay high, most of the subsidies — 96 % in oil, 87% in gas— will go directly to the pockets of investors as profit. And if prices go down, these subsidies will help 60% and 74% percent, respectively, of new oil and gas fields to remain profitable.
So there you have it. If you’re wondering why you pay so much in taxes yet receive so little back, it is because your state and federal governments give away so much money to help the wealthy and profitable companies become wealthier and more profitable. Please consider that when you vote.
*A recent study by Treasury economists found that the top 1% of Americans by income have reaped nearly 60% of the billions in tax savings created by the pass-through provision. And much of that went to the top 0.1%.
Tags: Brownback tax cuts, Corporate welfare, GILTI, income inequality, national-debt, Tax Cuts and Jobs Act, trickle down economics
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