Where are we with federal income-tax policy, who it benefits, and how it affects our nation’s ability to address urgent problems?
Our current policy came about with the passage and signing of the Tax Cuts and Jobs Act of 2017. The bill reduced the corporate income-tax rate by 40% and lowered individual income-tax brackets. It also increased the amount of money people can inherit, tax-free, from $5.6 million to $11.2 million. Republicans predicted the decrease in tax revenues would be offset by gains in economic activity. Almost all of them voted for the bill.
Democrats predicted that wouldn’t happen and voted against the bill. They were right. ”The TCJA did not pay for itself, nor is it likely to do so in the future,” the centrist think tank, the Brookings Institution, reported.
The U.S. Treasury collected $275 billion fewer in tax revenue in 2018 because of the cuts than it otherwise would have. The bill will cost the government $1.9 trillion over 11 years, the Joint House and Senate Economic Committee said.
Who have these tax policies helped? Corporations saved $135 billion during the first year and stand to save lots more. Of the Fortune 500 companies, 91 paid no taxes, at all. Instead of investing in capital and increasing workers’ wages, companies used their savings to pay dividends and to buy back company stock.
Most individual benefits went to members of households in the top 1% income bracket. In 2020 alone these households enjoyed an average tax break of $50,000, which is more money than the majority of people who work for a living earned.
Now President Joe Biden and most congressional Democrats want to pass the Build Back Better Plan.
Who would benefit from this plan? Those who feel the impacts of climate change and air and water pollution (because of more disastrous fires and floods and increases in cancer, asthma, and heat exhaustion). People who want their children to get a good pre-K-12 public education. Honest people who pay higher income taxes or receive fewer services because the IRS doesn’t have enough resources to track down and collect the $600 billion lost each year in tax revenue owed by tax cheaters. Those unable to afford college or trade school, while many unskilled jobs are disappearing. Those who cannot buy a car and therefore spend hours on inadequate public transportation to get to and from work. Parents who need or want to work but cannot afford child care. And people who are priced out of the housing, health care, and/or prescription-drug markets. This is most of us.
The Build Back plan as first proposed would cost $3.5 trillion over 10 years, paid for mostly through an increase in the corporate tax rate (yielding $1 trillion), an increase in taxes on annual incomes of over $400,000 (for another $1 trillion), and in better tax-law enforcement.
But Republicans are dead set against the plan. They’ve said they don’t want to raise taxes on rich people and corporations, and they’ve objected to empowering the IRS to catch people in their sophisticated schemes to cheat the government. Recently, Democrats said they’re willing to scale back the plan, but the GOP won’t budge.
Just think of all the hardships and economic losses to individuals and businesses that will occur, as well as the cost to the federal government, if we don’t get climate change under control. And think of all the people who could have a better life if the plan passes.