On December 2, the Senate passed a tax bill that is both mean and stupid.
The bill is stupid because it cuts taxes for US corporations -- which are enjoying record profits and heady valuations -- and for the country's wealthiest citizens -- who have done spectacularly well and now control a larger share of the country's income and wealth than ever.
Moreover, it does so in part by eventually raising taxes on the US middle class, who have fallen behind in the economic race and need help rather than more taxes, and in part by increasing the already gigantic US debt.
It is particularly stupid because there is a broad consensus of bipartisan agencies and economists who agree it cannot increase growth by anywhere near enough to offset the revenue losses driven by the tax cuts. We've tested the idea that tax cuts pay for themselves several times and in each case, have found that growth-related revenue falls far short of replacing lost tax revenues.
The bill is mean because to force fit the tax cut into the convoluted reconciliation process the Senate is using to bypass the need to attract 60 votes, the bill incorporates and depends upon a wide variety of service cuts. It's not surprising that Jack Bogle, the founder of Vanguard, has called the GOP tax plans, which include a House-passed version, a "moral abomination."
Consider some of the bills' most outrageous aspects.
Janitors and other university service workers who have accepted low pay in exchange for tuition breaks for their children will now be told that the tuition breaks their children receive will be considered taxable income for the employee, generating taxes the employee cannot possibly pay.
In the House version, teachers who buy school supplies out of their own pocket will lose the deduction for those expenses. Medical expenses will no longer be as deductible as has been the case -- which will hit senior citizens hard -- while inheritance taxes on multimillion-dollar estates will be lowered and eventually eliminated. Worst of all, we are now hearing that the higher deficits will require cuts to our most important and popular social programs: Medicaid, Children's Health Insurance (known as CHIP), Medicare and Social Security.
It is hard to square Republican support for the current bill with the party's longstanding and loudly voiced concerns about deficits and debt. After years of ranting about those issues, every Republican senator but one voted to approve this bill, which will saddle the country with a minimum of $1 trillion of additional debt.
For some reason, lots of people in America seem to have forgotten that we made our country great by building the world's best infrastructure, by creating and sustaining the world's finest public education system, by creating world-class medical institutions, and by engaging in a very robust research and development program. While we were doing that, we paid much higher taxes than we do today, and most Americans regarded government as a force for developing the public good.
We are discussing the wrong things. Our problems are not a consequence of excessive taxes; Americans pay lower taxes, as a percentage of GDP, than the citizens of all but four other members of the Organisation for Economic Co-operation and Development, and far less than the OECD average. Instead of cutting taxes on those who have done the best, we need to focus on helping those who have not done well enough. That means creating more opportunity by investing in infrastructure, expanding research and development, creating better public schools, supporting higher education -- and paying the taxes necessary to support those efforts.
The Senate's tax bill is now before a conference committee, which is attempting to negotiate a composite of the Senate bill and a similar tax bill passed by the House of Representatives. Whatever compromise is produced by the conference will set our country back, not move it forward. I think most Republicans must know that and if they do, I hope they will muster the courage to ignore politics and come down in favor of the common good rather than making the mixed up priorities of these tax bills the law of the land.
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