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Susan J. Demas

Susan J. Demas

Whiffing on Tax Cuts

December 1, 2017

“Well, at least I’ll get a tax cut.”

This was the common refrain I heard on the campaign trail last year from reluctant Donald Trump supporters, those who tended to live in the suburbs and wouldn’t be caught dead in a cheesy red #MAGA hat.

They were uncomfortable with the “Access Hollywood” tape in which Trump bragged about sexually assaulting women and didn’t care for his racialized language, particularly about immigration (which only hardline conservatives care about in Michigan, a state that’s had little population growth in decades).

But a tax cut sure sounded appealing, especially since millions of Michigan families are actually paying more taxes now after seven years of Gov. Rick Snyder and Republican rule in the Legislature.

Yes, you’d never know it by listening to GOP gubernatorial candidate Bill Schuette’s ads, but it’s true. The attorney general casts former Gov. Jennifer Granholm as the liberal supervillain who singlehandedly raised your taxes a decade ago (somehow forgetting she struck a deal with the GOP Senate to end a government shutdown).

Schuette also manages to overlook that Republicans in 2011 raised taxes 23 percent for individuals ($1.4 billion a year) to cut taxes for corporations 83 percent ($1.6 billion). Why is that necessary? Because unlike the feds, states can’t run deficits. So with less money coming into the state from businesses, the shortfall had to be made up somewhere else. So in addition to cutting funds for schools, universities and local governments, Republicans also socked individual ratepayers with higher bills.

Most people assumed they’d be getting a healthy tax cut based on GOP promises (and the decades-long branding campaign of Republicans as the tax-cutting party). So plenty of Michiganders were shocked when they had to pay their first tax bill under the GOP “reform.” Deductions people had counted on for their homes, charitable donations, college tuition, retirement and even their children were gone.

In 2015, Snyder and Republicans hatched a half-baked scheme to fix the roads by raising gas taxes and Secretary of State fees. Michigan’s roads are still terrible and your taxes shot up even more.

State tax increases have disproportionately hit the poor and middle class, while Michigan’s wage growth and per-capita income have lagged behind most states.

So it makes sense that Michigan voters would be eager for some tax relief from Washington, which is one reason why Trump won the state.

Because Congress doesn’t have to worry about balancing the budget, it’s pretty easy to hand out tax cuts like candy, even if the GOP’s top priority is giving them to the rich. I fully expected Trump and the Republican Congress to follow this playbook and devise a modestly popular tax plan.

But instead, they’ve used the Michigan model of catering to corporations and the wealthy at the explicit expense of the poor and middle class. The $1.5 trillion package speeding through Congress eliminates the alternative minimum tax benefiting those making over $200,000.

And it permanently chops the corporate tax rate from 35 percent to 20 percent (even though big companies already enjoy huge loopholes), while any middle-class tax cuts are temporary.

No wonder a Fortune columnist called the bill the “largest wealth grab in modern history.” Almost 40 percent will pay the same or more taxes out of the gate. Within 10 years, just 16 percent will see a tax cut of $100 a year or more.

Only 36 percent back the tax plan being rushed through Congress at breakneck speed in the latest Politico/Morning Consult poll.

It gets worse with the fine print, as even Trump economic adviser Larry Kudlow admits the plan will “hurt a lot of different people.” That includes 5.2 million seniors, the most reliable GOP voting bloc.

Millions in Michigan and nationwide take the state and local tax deduction (SALT) to offset some of their federal taxes. The Republican tax plan scraps it, which essentially means successful higher-tax blue states will be subsidizing low-tax red states.

You can forget about the student loan deduction, which is the only way millions of middle-class families can afford the exorbitant cost of college these days. The House-passed plan would devastate 145,000 graduate students who would see their tuition waivers taxed as income. In other words, they would have to pay taxes on $35,000 or $50,000, without ever seeing the money, which would likely cause thousands of students to drop out.

And it gets worse, with 13 million losing health insurance by axing Obamacare’s individual mandate. Because the bill is a budget buster estimated to balloon the deficit by $1.5 billion over the next decade, Republicans are looking to chop Medicare, Social Security and other programs, which will devastate seniors even more.

The argument that making tax cuts so lopsided for corporations and the super-wealthy while leaving almost everyone else behind is that businesses will hire more people.

“Frankly, I think they are bonkers,” David Mendels, former chief executive officer of software firm Brightcove, told Politico. “It really doesn’t work that way. No CEO sits there and says, ‘When my tax rate goes down, I’m going to hire more people and pay them more.’”

But those of us in Michigan already knew that.

Susan J. Demas is Publisher and Editor of Inside Michigan Politics, a nationally acclaimed, biweekly political newsletter. Her political columns can be found at SusanJDemas.com. Follow her on Twitter here.

November 30, 2017 · Filed under Susan J. Demas

1 response so far ↓

  • 1 Anagnorisis // Dec 1, 2017 at 9:37 am

    Good. And I like that Lessenberryan epigram (like we didn’t know). This article sums the tax scam from Lansing to DC, the philandering Conman in Chief, and the cognitive dissonance of supporters who voted for their own hoisted petard. Praise DOME.

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