Anyone committed to narrowing the huge economic gulf separating this country’s haves and have-nots probably views Dec. 22, 2017, as a date that will live in infamy. That’s the Friday when President Donald Trump signed the Tax Cuts and Jobs Act of 2017, a GOP-sponsored early Christmas present for corporations and the uber-wealthy that’s projected to tack an additional $1.5 trillion onto the national debt.
Following a year of unprecedented Wall Street earnings in 2017, the rich now have an additional tool to wring even more wealth from a booming world economy in 2018. For businesses, the corporate tax rate plummets from 35 percent to 21 percent, while married couples who file jointly and make $600,000 or more annually will see their tax rate shrink from 39.6 percent to 37 percent. The law also lowers taxes for most middle- and working-class taxpayers, until these temporary cuts begin to sunset.
“I think the most important thing to take away from the tax law is that it is an enormous upward redistribution of wealth, particularly a redistribution of wealth for those who make money by having money, as opposed to those who make money by having a job,” says Vanessa Williamson of the Brookings Institution, in Washington, D.C.
Williamson calls it “a mathematical certainty” that the new tax-cut law will further widen the economic chasm between rich and poor U.S. citizens. “The reality in the United States is that people of color have been systematically kept from economic opportunities for generations, which means that even Blacks who earn a high salary today are unlike to have the kind of wealth that white Americans with similar jobs have, because white Americans have relatives with jobs that were denied to other people.
“When we give a [tax-law] gift at the expense of people who are not wealthy, we are also giving a gift to a disproportionately white population, at the expense of a disproportionately non-white population.”
Trump and Republican lawmakers in the U.S. House of Representatives and the U.S. Senate had disingenuously touted their tax legislation as long overdue “tax reform” that would toss an economic life raft to middle-class families. After going through most of 2017 without a significant legislative victory, GOP senators were so desperate to pass the Tax Cuts and Jobs Act of 2017 that they voted on the measure in December without waiting for newly elected Democratic Alabama Sen. Doug Jones to join the Senate.
“This was really about delivering a whopper corporate tax cut. That was the main drive of the whole process,” says Chuck Collins, director of the Program on Inequality at the Institute for Policy Studies. “The conservative agenda is to cut taxes and then weaken the social safety net.
“So I think we’re headed toward austerity politics now, created in part by this tax cut,” Collins predicts. “The wealthy are going to be creating tax shelters, creating pass-through corporations. And that’s going to create a demand for further [federal] budget cuts,” after the impact of that missing tax revenue is felt. Collins says that with defense appropriations viewed as “off limits,” it’s only a matter of time before Republicans start looking to chop funding to Medicare, Medicaid and Social Security.
The reason the tax-cut law is such a sweetheart deal for corporate America, according to Collins, is that all the tax cuts for businesses are permanent, while cuts for individuals will be phased out over the next five to seven years.
Angela Campbell, a Black advertising executive living in Manhattan, isn’t surprised the GOP’s tax legislation put corporations in the catbird seat. “It’s a crap shoot whether they will pass along any of those savings to working people,” Campbell says. “I will believe it when I see it. Some companies are talking about infusing their savings into employee-development initiatives, but it’s just talk until I see action.
Campbell, who has college-bound children 17 and 14, points a provision in the tax law that slaps a 1.4 percent excise tax on the endowment returns of private universities that have at least 500 tuition-paying students and nonexempt assets of more than $500,000 per student. “They use that money for financial aid,” Campbell notes. “Most of the Ivy League schools have a policy that if you come from a family making less than $75,000 and you get admitted to Harvard or Princeton, you go for free. In my mind, it means they can no longer be as generous with the people that need it the most. That’s what worries me most about the tax bill.”
Inequality expert Chuck Collins says the new tax law “accelerates existing trends, meaning that if you own a lot of assets, if you already are in the top 20 percent, you’re going to see your fortunes improve. But if you depend on a wages, a paycheck, it will compound existing inequality, including the racial divide.
Trump and congressional Republicans “didn’t pass this with Black people in mind, with people in mind who are not on the asset-building train,” Collins says. “It’s a lost opportunity in terms of actually reducing wealth inequality. For example, the tax law reformed the mortgage interest deduction, but instead of directing the funds to those who have been excluded from home ownership, they’re using that saving to pay for a corporate tax cut.”
Drake Warrick, a Black international development official in suburban, Washington, D.C., says it appears the new tax law won’t boost — or hurt — him and his family of four.
“It’s not going to pull generations out of poverty,” Warrick notes drily. “I’ve looked at it to the extent that if affects my income. I talked to my tax man and he said, ‘Drake, it’s not going to do much for you!’ It’s not going to hurt me, but I’m not going to get back $30,000. I don’t have investments that are going to benefit from any kinds of write-offs. I’m in the same situation I was in before the bill passed.”