GOP’s tax reform is a ‘middle-class con job’

Some Democrats are rightly calling the tax reform being proposed by Republicans as a “middle-class con job,” and they are hoping they can work with President Trump to override what amounts to a dismantling of the tax code.

Republicans maintain that cuts in corporate taxes will result in companies paying workers higher wages. Sound familiar?

{mosads}In December 1981, David Stockman, President Ronald Reagan’s director of the Office of Management and Budget, asserted that the Kemp-Roth tax reform legislation was really just a “Trojan horse” to bring down the top tax rates on the wealthy in what he derisively referred to as “trickle-down” theory.

What he didn’t fully articulate was that once those tax cuts failed to deliver the promised investment explosion, we would simply be left with higher deficits. This would create an opening those on the far right, from the John Birch Society to the tea party, had been looking for since the New Deal was first established in the 1930s.

There would be a powerful justification for attacking American liberalism, for arguing that we could no longer afford federal programs such as Social Security and Medicare, let alone the plethora of other federal programs designed to help the middle class and the poor. 

The current round of tax cuts should be déjà vu for those old enough to remember trickle down economics. What Republicans are offering will create an artificial fiscal crisis that will justify tackling what are arguably two of the nation’s proudest creations: the Social Security and Medicare programs.

For years, Republicans have been worried sick that Social Security and Medicare would go bankrupt when there are not enough existing workers to pay the FICA taxes necessary to support all the existing retirees.

But baby boomers are an historical anomaly whose retirement will present a short-term bubble of Social Security and Medicare demand. Once they are gone, that deficit will diminish. Meanwhile, we could pretty much ride out that anomaly by lifting the cap on FICA taxation. There is no reason income above that cap should not be taxed. If those additional revenues produce a surplus after the baby boomers are gone, the cap could be re-imposed.

Democrats need to more strenuously attack this “tax reform” as more of the Reagan-era same, as a Trojan horse to lower taxes on the wealthy, some of which had been put back under Presidents Bill Clinton and Barack Obama. If passed, the proposed code would put us in an even tighter fiscal bind where we will have to look at cutting Affordable Care Act subsidies, Medicare and Social Security.

If we allow Congress to significantly reduce those programs, the top 1 percent essentially will have it all, and the middle class will continue to atrophy. It will increase the number of Americans trying to survive paycheck to paycheck. 

If funding is reduced for Social Security and Medicare programs, the already stressed working class will have to bear even more of the burden of supporting their elderly relatives. Those without family support will be left to the vagaries of private charities, which are likely to struggle with fewer donations from Americans with shrinking disposable income. 

And there is the political dimension. Subsequent Democratic presidents and majorities will once again have to be the bad guys by restoring the earlier tax rates. The Republican Party is able to sell itself as the party that lowers taxes. The Democrats end up as the party that raises them in order to be fiscally responsible while still providing basic humane services — which expand the middle class.

That is a vicious cycle the Democrats should be smart enough to see, explain and attack.

Marcus D. Pohlmann is a professor of political science at Rhodes College in Memphis. He has written extensively on race, poverty and urban education.