The Republican tax bill benefits the establishment and corporate allies

The Republican tax bill benefits the establishment and corporate allies
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The tax plans rolled out by the House and Senate are well aligned with special interests, but most of the individual donors out in the country are getting screwed. Let’s get to it, first with the math. The proposed tax deal’s math is disconcerting. We have a $20 trillion debt, and despite tax revenues hitting record highs, we are running deficits on an annual basis.

Federal spending as a percent of gross domestic product was generally at 23 percent to 25 percent under President Obama, and has come down to 21 percent this year. Meanwhile, federal revenues over the longer term since World War II have hovered at 17 percent to 18 percent, irrespective of fluctuating tax rates and policy.

To stop falling further into debt, absent growth, the government needs to collect more money, cut spending, or do a bit of both. If it can adopt tax policy that stimulates growth, revenues go up, and it doesn’t need to cut as much spending. Now, the politics is always easier because the decision-makers need not look further out than the next news cycle or election. All elected officials know who their voters are. All they have to do is turn them out.

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As I have written before, “establishment” politicians have historically taken care of their campaign finance networks on policy so they have the resources to scare off or overwhelm challengers in primaries, and are mostly in safe seats so they cruise to victory in the general. But that calculus no longer holds true because new election technology and methods give the advantage to candidates in better alignment with the voters.

Nowadays challengers need only enough money to buy a great voter list, and communicate to their voters through social media and micro-targeted messaging. They just have to inform their voters how the incumbent is out of alignment on the issues. Every donor I know, many of whom I’ve asked to participate in one campaign or another to help elect Republicans over the past 30 years, is going to be paying more taxes under the House plan.

Those in the service industry, such as doctors, lawyers and accountants, will see their tax burden go up because their deductions are being limited or eliminated altogether. Privately owned businesses, or pass-throughs, will see their tax burden go up, unless they make less than $1.3 million per year. Those in industries or locations with large exposure to state and local taxes will pay even more. These parties, the “losers,” are paying for the reductions to be given to others, the “winners.”

The projections touted by those pushing the plan say middle class taxpayers will see an average reduction of $1,100. Collectively, that amounts to 20 percent of the benefit. Personally, I wish they all got a greater benefit, because $1,100 is less than $100 per month. Helpful, appreciated I’m sure, but hardly life changing. These productive wage earners are the providers for their families, the engine of our society and the consumers that drive the economy.

The smallest privately owned businesses, those earning less than $1.3 million will see a reduction in tax burden. Collectively, they will see 20 percent of the economic benefit. These are the mom and pops, and I’m glad for them. They are under siege with competition from the internet economy and category killers like Wal-Mart and Amazon.

Corporations in general are big winners. They will see a reduction in tax rates to 20 percent. That is a significant benefit to a comparatively smaller class of well connected folks. Their lobbyists should get a significant raise. The biggest winners are global and multinational corporations that have used inversions and other creative structures to avoid taxation at home, and are getting a windfall in the form of an even greater tax holiday.

Tim Cook over at Apple will be able to pay some larger dividends. As an Apple shareholder, I look forward to it. As a Republican donor, I’m concerned. This group is despised by Trump voters and the GOP base, and yet they are getting a huge win. Their lobbyists should get a whopping bonus. Unfortunately for the math problem, the businesses that generate the most new jobs are not global, multinational corporations, or large domestic corporations. These are mostly mature businesses.

Most job growth occurs in privately-owned companies and the service industry in particular, and they are getting hit with the tax bill. On the political side of the equation, these job-creating business owners are the same people who serve as the leaders in the donor wing of our party. That’s bad politics. If any of the guys we ask for checks knew that the Republicans they were helping get elected would raise their tax burden, they would not have supported them in the first place.

Ronald Reagan did a simple, sweeping reduction of marginal tax rates across the board, and the animal spirits of the job creators were awakened and the economy grew. More recently, Obama divided our society and made the argument it is immoral to give “tax cuts to the rich.” Apparently, the GOP establishment agrees. The math demands a tax plan that benefits job creators and the middle class that will drive consumption and growth. This isn’t it.

This plan benefits the establishment’s allies, the largest corporations and global businesses, at the expense of the privately owned businesses that create the jobs and write the checks for Republican candidates. Given the new realities of how elections are won and lost, the tax plan as presently crafted is not good politics either. We all created this once in a generation opportunity. We all want, and demand results, but the emphasis should not be on speed at any cost based on stale political calculus, it should be on getting it done right.

Dan Palmer is a Republican donor and conservative political strategist. He served as executive director of United We Stand, planned the potential transition of Ted CruzRafael (Ted) Edward CruzDebbie Wasserman Schultz marks 10 years as breast cancer survivor Foreign agent registration is no magical shield against Russian propaganda Let Trump be Trump and he'll sail through 2020 MORE, and supported the campaigns of Kevin McCarthyKevin Owen McCarthy34 House Republicans demand DACA action this year GOP leaders agree to consider Dec. 30 spending bill House approves motion to go to tax conference — with drama MORE and Donald TrumpDonald John TrumpHouse Democrat slams Donald Trump Jr. for ‘serious case of amnesia’ after testimony Skier Lindsey Vonn: I don’t want to represent Trump at Olympics Poll: 4 in 10 Republicans think senior Trump advisers had improper dealings with Russia MORE. Find him on Facebook @RealDanPalmer.