As 2017 came to a close, the Trump administration had few victories and mostly bluster to show for its first year in the White House. But it did manage to end the year with an extravagant Christmas gift for the US ruling class. The “Tax Cuts and Jobs Act” (TCJA) was widely treated as more of a “wishlist for the rich” than a real policy proposal in the weeks leading up to its passage. The bill passed both houses of Congress despite last-minute posturing by a few supposed Senate “holdouts,” and was signed into law by the president a few nights before Christmas.
The TCJA certainly contains tax cuts—for the rich. As an example, currently, individuals worth $5.49 million or more are subject to an estate tax of 40% on each dollar above that amount when they die and pass on their wealth. The TCJA raises the estate tax wealth threshold to $10.98 million, allowing an estate worth $10 million to be inherited by the next generation of the wealthy entirely tax-free. It also reduces the taxation rate for the top income bracket from 39.6% to 37%, and the tax rate on corporations from 35% to 21%.
Although some workers will see nominal reductions in their tax burdens in the initial years following the TCJA’s passage, their tax cuts will expire after 2025, while the corporate tax cuts will remain permanent. The Joint Committee on Taxation estimates that this “reform” will add hundreds of billions of dollars to the deficit by 2027, meaning even less money for social services, healthcare, education, and more.
The “Jobs” part of the TCJA’s title is where it gets truly Orwellian. The bill’s proponents promise, as the right has done for decades, that lowering the corporate tax rate will result in the creation of more jobs as businesses use the money they save to invest in production. First of all, it should be pointed out that US corporations are sitting on a mountain of cash—the Fed’s estimate puts it at a record $2.4 trillion in 2017, not counting another $3 trillion in offshore accounts.
Given the level of overproduction in the global economy, the capitalists correctly estimate that an expansion in investment would not be rewarded with profitable returns, so a further increase in disposable cash is far more likely to be passed directly to investors. The reality is that US corporations actually do not pay anywhere near the 35% at which they are officially taxed because their lawyers and accountants find countless ways to lawfully evade paying Uncle Sam. Unsurprisingly, the TCJA does nothing to eliminate these loopholes.
As a result, the actual savings they will realize from the reduction of the corporate tax rate will be considerably lower than those numbers on paper would suggest.
Despite Trump’s ad nauseam claims that he will put “America first,” not only does the TCJA fail to prevent further offshoring, it actually rewards companies for opening factories overseas while penalizing companies for creating jobs in the US. This will further deprive the federal government of tax revenue that could, in theory, be used to offset the deficit and preserve Social Security, Medicaid, Medicare, and other social programs upon which American workers depend. In fact, the ink on the bill had hardly dried when news broke out that Walmart, the largest private employer in the country, would be closing 63 Sam’s Club stores, laying off up to 11,000 workers.
House Speaker Paul Ryan has indicated in no uncertain terms that he and other Congressional Republicans intend to use the increased deficit as a pretext for “entitlement reform,” a despicable euphemism for drastic cuts to—if not the outright elimination of—all of the aforementioned social programs. Medicare, in particular, is likely to face automatic cuts under the federal government’s “Pay As You Go” rules, due to the $1.5 trillion that the TCJA is projected to add to the deficit.
This declaration of war against the working class was met with only tepid, token opposition from the Democrats. In fact, despite the insistence by many Democrats that the Senate should delay voting on the TCJA until Democratic Alabama special election winner Doug Jones could be seated, Jones himself was on record mere days after his upset victory as being “undecided” as to whether or not he would “cross the aisle” and support the bill! Jones was not the only one with doubts. West Virginia Democrat Joe Manchin said in a recent interview that people would “initially benefit” from the Republican tax plan, adding, “I was for lowering corporate taxes from 35 to 25.”
The persistent rightward shift of this remarkably out of touch capitalist party explains why an overwhelming majority of youth have had it with both parties. A recent poll found that a record 71% of millennials believe that a third major political party is needed. While the Democrats and Republicans fight over how best to make the working class pay for the crisis of capitalism, the growing discontent has the potential to overturn the political landscape once a class-independent lead to the left of the Democrats emerges.