Tax reform has been a hot topic since Donald Trump was elected president. Big corporations and the wealthy have been salivating over the prospect of a major tax cut ever since Trump released his “Tax reform that will make America Great Again” (or for short #TRTWMAGA) plan during the campaign and another plan in April. Both of these plans are long on harmful policy ideas while being short on details, but they contain key assumptions that underpin Trump’s budget proposal released on May 23. The House Republicans put forward a more comprehensive, but just as problematic, blueprint for tax reform in June of last year.
Last week, the House Ways and Means committee held its first hearing of the year on comprehensive tax reform. It should come as no surprise that the U.S. Chamber of Commerce has been driving much of the narrative surrounding the GOP’s reform blueprint since it was so heavily skewed in favor of Big Business at the expense of average taxpayers. Prior to the hearing, in a letter to Chairman Brady, the U.S. Chamber noted that “significant rate reductions for corporations and pass-through entities, expensing of capital purchases, an internationally competitive system for taxing foreign earnings, and simplification” are meant by “tax reform” though all of those policies would damage, rather than reform our system.
While the tax reform plan Trump campaigned on would give trillions in tax breaks to the rich and large corporations, it is only briefly mentioned in his recent budget proposal, though it supplies much of the funding tradeoffs that “balance” the budget over 10 years. The components that are mentioned in the budget, however, stem from policy proposals championed by the Chamber, and can also be found in House Ways and Means Committee Chairman Kevin Brady’s and Speaker Ryan’s tax reform blueprint. So, the GOP tax reform plan is really the Chamber’s tax reform plan, and it is designed to benefit its membership, which is made up of some of the richest corporations and individuals in our country.
Below we detail some of the main ways in which the Chamber’s tax reform proposals would result in a major payday for wealthy individuals and corporations:
Death and Taxes: Both the Chamber and Trump wish to abolish the estate tax, which would represent a massive tax cut for the heirs of the very wealthiest families, and would cost $174 billion over the course of 10 years. While we haven’t seen Trump’s tax returns and likely never will, we can safely assume that Trump’s heirs could gain hundreds of millions or even perhaps billions of dollars if the estate tax were to be repealed. The Chamber has been a staunch opponent of the estate tax for years, claiming that it harms family businesses, though that’s plainly not true. In 2016, the individual exemption was $5.45 million, a pretty penny to inherit tax-free, and the Tax Policy Center Tax Policy Center estimates that “only 120 farms and small business, where at least half the assets are in farm or business assets, had to pay the estate tax in 2013”.
The Trump Loophole: Big businesses oftentimes masquerade as small businesses by organizing themselves as pass-through entities, a tactic used by hedge funds and real estate companies (See, Trump Organization LLC) to reduce their tax bills, costing the U.S. Treasury billions. Trump’s proposed tax plan lowers the tax rate for business income from 35% to 15%, (referred to as the “Trump Loophole”) and would reduce taxes paid by wealthy recipients of “pass-through” business income by $2 trillion over the course of 10 years. Reducing the tax rate on business income is something the Chamber is championing.
Reverse Robin Hood Health Care: The Chamber has long lead the fight to repeal the Affordable Care Act (ACA), and has been a proponent of the GOP’s (American Health Care Act) AHCA . If the ACA is repealed, manufactures of prescription drugs and medical devices would see a decrease in taxes levied on their products, thus pharma supports repealing the ACA, despite the fact that with its expanded coverage more people will be able to afford care including drugs and devices. So repeal of the ACA, yet again, results in tax cuts for the wealthy, at the expense of everyday Americans. The Joint Committee on Taxation estimates that repeal of the ACA would deliver roughly $144 billion over the coming decade to those with incomes of $1 million or more.
Conspicuously missing in the Chamber-Trump tax reform proposal? Any proposals that help average taxpayers by making corporations and wealthy pay their fair share: Eliminating a $4 billion tax preference that oil and gas companies receive (for which the Chamber lobbies), repealing a loophole that allows corporations to deduct unlimited amounts of CEO-pay from their taxable income, supporting real corporate tax reform that would require profitable multinational companies like Apple to pay taxes on offshore profits, or instituting progressive new taxes like on Wall Street trades.
The tax reform proposals championed by the Chamber and largely adopted by Trump, much like his newly released budget, are rigged for billionaires and big corporations- they constitute comprehensive tax giveaway to the superrich and a payback scheme for big business. The Chamber states that it “will be at the table throughout the process—because anyone who isn’t at the table risks ending up on the menu.” If the Chamber can help it, average tax payers, many of whom voted for Donald Trump because they believed his promises to stand up for working people, will most definitely not be getting a seat at the table.
Unfortunately, as Trump’s tax reform proposals yet again prove, it’s not the people’s agenda that he’s intent on implementing, but rather the Chamber’s agenda.