6 months in, GOP tax bill an utter flop

Six months after President TrumpDonald John TrumpTrump rallies in Nevada amid Supreme Court flurry: 'We're gonna get Brett' Trump: 'Good news' that Obama is campaigning again Trump boosts Heller, hammers 'Wacky Jacky' opponent in Nevada MORE and Republicans in Congress jammed through massive tax cuts mostly for corporations and the wealthy, it has become clear that working families are suffering while billionaire GOP campaign contributors luxuriate in a tax windfall.

While stumping for his tax plan, President Trump claimed cutting taxes for big corporations would result in an average pay raise of $4,000 for working families.  

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Well, the tax bill slashed the corporate tax rate by more than 40 percent and handed multinational corporations a $400 billion tax discount on their accumulated offshore profits, but what was the result? 

 

Working people are still waiting for their $4,000 raise. Average hourly wages have actually gone down slightly, after adjusting for inflation, since the tax bill passed.

So where did all the money go? Corporations are not reinvesting their tax windfall; they are paying that money out in the form of stock buybacks and dividends.  

Stock buybacks boost stock prices and CEO pay in the short term, making the rich even richer, but most financial analysts say that money could be put to better use investing in the long-term success of the company.

The rest of the tax windfall from the new law — individual tax cuts — is also flowing into the pockets of corporate CEOs and other millionaires. Once fully phased in, 83 percent of the tax cuts in the new law will go to the richest 1 percent.

Republicans claimed their tax plan would put a stop to outsourcing, but the opposite is true. When it comes to outsourcing, the tax law is a job killer. The base tax rate for profits from outsourced jobs is zero. The best case is foreign profits would be taxed at half the rate as domestic profits.  

It's that simple — the Trump-GOP tax law taxes corporations that create jobs in the U.S. and subsidizes corporations' outsourcing of operations and jobs offshore. Republicans also claimed the new law would stop corporations from hiding profits and shifting jobs offshore, but profit shifting will pretty much continue as before.

Motorcycle icon Harley-Davidson offers a good example of how American corporations are taking advantage of their tax windfall. The tax benefit to Harley-Davidson — a profitable company with $800 million to $1 billion in pre-tax profits — appears to have provided the capital to fund a plan to outsource U.S. jobs.  

Following passage of the tax bill, the company announced the layoff of 800 workers at a plant in Kansas City, the opening of a new factory in Thailand and a plan to buy back 15 million shares currently valued at $700 million. 

The total cost of the GOP tax boondoggle is $1.9 trillion to $2.3 trillion. Right on cue, Republicans are now trying to push through drastic cuts in MedicareMedicaid, Social Security and public education to make up for the lost tax revenue.  

Generations of working people fought hard to establish these programs that help make our society more civilized. We stand in full-throated opposition to any attempt to dismantle these accomplishments in order to line the pockets of Wall Street CEOs and other corporate chieftains and make the rest of us pick up the tab.

Finally, by weakening a central part of ObamaCare to pay for tax cuts for the rich, the Republican tax law will raise health insurance premiums for working families and cause 3 million people to lose health coverage in the next year.

Republicans claim their tax cuts are responsible for the strength of the economy, but job growth has continued its slow decline from the peaks of 2015 under Obama. Average monthly job growth was stronger under Obama after the Great Recession than it has been under Trump. 

Not content with giving away the store to the rich and profit-laden corporations, Republicans are now talking about a “round two” of tax cuts, which would again mostly benefit the rich

Rather than doubling down on a bad idea, we should correct our mistakes. The AFL-CIO believes the Republican tax law, as enacted, will be destructive to jobs and growth over the long term. 

We urge Congress to make significant structural changes to the tax law, beginning with the following:

1. Eliminate all the incentives for outsourcing jobs and profits built into the Republican tax bill, including by equalizing the corporate tax rate for offshore and onshore profits, as provided in the No Tax Breaks for Outsourcing Act of 2018 (S. 2459/H.R. 5108) introduced by Rep. Lloyd DoggettLloyd Alton DoggettTrump is wrong, Dems are fighting to save Medicare and Social Security Texas police arrest man for allegedly setting fire outside Dem lawmaker's office: reports Compulsory pharmaceutical licensing is little more than government theft MORE (D-Texas) and Sen. Sheldon WhitehouseSheldon WhitehouseDem vows to probe 'why the FBI stood down' on Kavanaugh Senate Democrats increase pressure for FBI investigation of Kavanaugh Senate Dems sue Archives to try to force release of Kavanaugh documents MORE (D-R.I.).

2. Equalize the tax rate between labor and capital through a combination of a Wall Street Speculation Tax, a higher tax rate on capital gains and collecting Social Security and Medicare taxes on capital gains.

3. End the gigantic loophole the Republican tax law opens up for tax avoidance through pass-through business structures, which threatens massive revenue loss and treats income from similar business activities differently depending on the legal form they take.

4. Restore the deductibility of state and local income taxes, or alternatively offer comparable direct federal support to critical state and local government activities in the areas of education, infrastructure and health care.

Congress should use the money saved from fixing this terrible tax law to invest in America. The U.S. needs to invest trillions of dollars in our infrastructure to be competitive in the 21st century. 

Senate Democrats have proposed a good start on what we need to do — $1 trillion for rebuilding and improving our country’s roads, bridges, schools, waterworks, rail systems, electrical grid and more, creating millions of good-paying jobs all along the way.  

All this could be paid for by repealing the GOP's huge, pointless, job-killing tax breaks for corporations and the wealthy. 

Damon Silvers is policy director and special counsel at the AFL-CIO, the largest federation of unions in the United States.