A Trump administration staffed by plutocrats – most of whom gained their wealth from rent-seeking activities, rather than from productive entrepreneurship – could be expected to reward themselves. But the Republicans’ proposed tax reform is a bigger gift to corporations and the ultra-rich than most had anticipated www.project-syndicate.org
Having failed to “repeal and replace” the 2010 Affordable Care Act (“Obamacare”), US President Donald Trump’s administration and the Republican congressional majority have now moved on to tax reform. Eight months after assuming office, the administration has been able to offer only an outline of what it has in mind. But what we know is enough to feel a deep sense of alarm.
Tax policy should reflect a country’s values and address its problems. And today, the United States – and much of the world – confronts four central problems: widening income inequality, growing job insecurity, climate change, and anemic productivity growth. America faces, in addition, the need to rebuild its decaying infrastructure and strengthen its underperforming primary and secondary education system.
But what Trump and the Republicans are offering in response to these challenges is a tax plan that provides the overwhelming share of benefits not to the middle class – a large proportion of which may actually pay more taxes – but to America’s millionaires and billionaires. If inequality was a problem before, enacting the Republicans’ proposed tax reform will make it much worse.
Corporations and businesses will be among the big beneficiaries, a bias justified on the grounds that this will stimulate the economy. But Republicans, of all people, should understand that incentives matter: it would be far better to reduce taxes for those companies that invest in America and create jobs, and increase taxes for those that don’t.