Trump tax policy favors corporate elites, threatens workers
Donald Trump rose to the presidency largely by preaching a populist message of economic nationalism to stand up to neoliberal corporate globalization. The president is to be commended for remaining consistent on that message when it comes to his withdrawal from the Trans-Pacific Partnership (TPP) trade deal, which gave provisions for corporations to change environmental, safety, and labor laws of sovereign nations without the consent of the governed through seeking arbitration in the corporate-representative dominated court known as the Investor State Dispute Settlement (ISDS). Still, whether Mr. Trump will actually make trade deals that advance the interests of workers remains to be seen, and the possibility exists that he might in fact make worse trade deals than the TPP. The opposite of anti-corporate economic nationalism is certainly being pursued, however, in the President’s tax plan, which portends an alarming ceding of American leadership and a threat to democracy and sovereignty around the world.
Despite the good of maintaining democratic institutions and sovereignty brought about by withdrawing from TPP and avoiding the ISDS, the downside is that it gives authoritarian China — under whose hegemony environmental, safety, and labor standards are also unlikely to be met — the upper-hand in setting economic conditions for the Asia-Pacific region. This abdication of American leadership in the region is all the more troubling considering that the Bank of China is a tenant in one of the president’s buildings, and the president may be paying back loans from China. However, the public cannot know if the loans are being paid, because the president has not released his taxes. Tough talk notwithstanding, Trump showed China a sign of warmth in his appointment of Governor Terry Branstad (R-IA), who has a relationship with Chinese President Xi Jinping dating back to 1985, to be the U.S. ambassador to Beijing.
The president’s tax plan calls for corporate taxes to be lowered from 35 percent to 15 percent; the highest income tax bracket of individuals, who make $415,050 and over annually, to be lowered from 40 percent to 32 percent; and the lowest taxpaying bracket of individuals, who make $0 to $9275 annually, to be increased from 10 percent to 12 percent. Such tax cuts for the rich and corporations, besides causing unfair increased tax burdens on those less able to afford it, are widely considered to be laying the groundwork for an explosion in the national debt (the nonpartisan Congressional Budget Office estimates $10 trillion growth in debt over the next 10 years, playing into the hands of China who owns much of the debt.
The Trump-GOP tax argument goes that in order to realistically provide Americans with jobs, the U.S. must repatriate billions of dollars of offshore corporate funds by incentivizing with a warmer business environment of deregulation and lower taxes. They claim the economy will grow so much by lowering restrictive taxes that government revenue will increase, despite taxing at a lower rate, because more people or items will be taxed than before since employment and consumption will increase substantially. However, the experience of former Presidents Ronald Reagan and H.W. Bush should show that revenue does not increase with supply-side economics because if taxes are effectively not being collected because they are so low during times of increased spending on the military and defense (as Mr. Trump proposes), then there will be no revenue for the government and debt will increase greatly as it indeed did under Reagan (from $1 trillion to $2.9 trillion, according to White House historical budget tables), which is why Bush famously, or rather infamously, had to raise taxes despite the campaign promise of his much-read lips.
Beyond a debt explosion, incentivizing corporations to repatriate funds to the U.S. does not actually guarantee substantial increase in good or equitable jobs. According to nonpartisan think tank, the Economic Policy Institute, “the CEO-to-worker compensation ratio, 20-to-1 in 1965, peaked at 376-to-1 in 2000 and was 303-to-1 in 2014, far higher than in the 1960s, 1970s, 1980s, or 1990s.” Such pay disparity, combined with the President’s and the GOP’s opposition to raising the minimum wage, means that there is no guarantee that the jobs corporations provide are going to actually be well-paying.
Corporations increasingly use automation to replace human workers, a practice championed by the President’s withdrawn Labor Secretary pick, Hardee’s and Carl’s Jr. CEO Andy Puzder. A 2013 study by Oxford researchers Dr. Michael A. Osborne and Dr. Carl Benedikt Frey “estimated that 47 percent of jobs in the U.S. are ‘at risk’ of being automated in the next 20 years.” This means there is no guarantee that corporations repatriating funds will really result in substantial increases in human employees or that the jobs available will be not just accessible to those fortunate enough to receive university education. If the GOP is going to take credit for providing better, higher-paying jobs for Americans in engineering or robotics, then it must back that up by supporting universal access to education that will support those careers. The administration must at least execute a plan to significantly lower student debt. It is unlikely, however, that the GOP would advance an expensive idea like universal education to which they are currently ideologically opposed.
Rather than beg corporations for alms in the form of employment by giving them carte blanche operation in our country, the U.S. should instead take the stance that our resources and labor force are valuable. It is the government acting on behalf of American workers that has leverage over corporations to demand that they pay their fair share of taxes, rather than let them off the hook with the excuse that they are job creators. With revenue from corporate taxes, the government, which is controlled by the will of the voters, rather than corporations controlled by the will of the Board of Directors, can then fund good jobs in public programs. Furthermore, the U.S. should use its great influence to lead other countries to tax corporations their fair share so nations do not undergo a Hobbesian process of undercutting each other’s corporate tax rates, which is exactly the division that the corporate elites use to conquer.