Tax Cuts for the Super Rich, Financial Assault on the Working People

Tax plans are basically pictures of envisioned futures. So, to distill to its essence the tax proposal currently under consideration in the U.S. Congress and promoted by President Trump as something beautiful, we should counter-market it as: Jacking Up the Social Rent for the Working Peoples Act.

Marx described law as the official codification of the status of the lines of battle in the class struggle. For example, if the law dictates that child labor is allowed, capital has won; if specific laws ban such things, those on the side of labor and decency have won the battle. Likewise, if the prevailing law designates wealth accumulated through financial speculation as a separate class of income worth more, compared to earnings through labor (intellectual or physical), finance capital has won the battle. For now, at least.

The Republicans’ intension is very clear: strategic weakening of our side, by chipping away at, by damaging, destroying completely when and where possible, and by taking away as much of the public infrastructure as they can; infrastructure we need for our basic survival in safety. And by doing so, they reduce our ability to put up an effective fight down the line.

On the face of it, the proposed tax plan is marketed as something to help most earners receive some tax cuts. In absolute dollar amounts, however, here are some revealing figures from an article published by the Forbes magazine:

“In dollar terms, 53% of the cuts would go to the top 1% and 30% to the top 0.1% (those with expanded cash income of $3.4 million or more). Put another way, the top 1% would see an average $129,030 tax cut and the top 0.1% would save an average of $722,510, while those in the middle quintile would save an average of $660 per family.”

Clearly, the short-term benefits for most workers (all of which will disappear by 2027 at the latest) are minimal in terms of the extra purchasing power those tax savings can provide. Most likely, the average workers will receive enough extra cash to pay somebody back, on due payments. Meanwhile, the top 0.1% will receive enough tax cuts to cover the costs of servicing and maintaining their yachts for a year.

However, the reduced amounts in tax revenues as a result of the wealth gifted to the rich, amounting to trillions of dollars over the next decade, will necessitate reduced spending on social needs of ordinary people.

In terms of long-term loss of social services, social benefits, as well as the loss of investments in public infrastructure, in safe roads and bridges, to expenditures on basic health and education for working people, all the way to environmental protections, to enforcing workplace and housing safety standards, in all these and myriad other social needs, permanent losses are guaranteed to be enforced as severely as they are currently enforced in Greece; the totality of social loss for the average citizens, over the coming generations, will be certain and will go deep.

Wealth destruction, a necessary component of economic cycles that characterize capitalist ‘development’, does not have to happen in over-dramatic, huge and immensely destructive one-time events, such as wars or market crashes, or long recessions such as the one we’re still recovering from. Wealth destruction can be written into law, to be implemented in slow motion and over long periods of time, aimed at very surgically selected populations; just as the current tax proposal is aiming to do.

The more social services are privatized, the more varied social services will be denied to the most vulnerable. A decent education, good healthcare, safe streets, safe neighborhoods; even basic healthcare, safe food, water or soil for planting; all will be things to be paid for. There will be gradations of all these privatized goods, and an associated rent for every level of quality of goods and services provided.

Another dimension of taxation relates to the recently leaked Paradise Papers, documenting in some detail what has been known for long: international finance has created internationally dispersed centers for cash to be parked safely and away from snatching hands of governments, safe from taxation. As the population constituting the tax base shrinks and is less populated by corporations and the top 1%, it will be more densely populated by the people who earn a living by working.

This amounts to an extra layer of (social) expropriation of surplus from the working classes. In other words, this tax plan, if passed, will be the official codification into law of a higher social rent to be paid by working families. In the same process, the corporations and the top 1%, by the letter of the law, and speaking through their pliable representatives in the U.S. Congress, will give themselves a huge tax break (pay raise) by codifying into law, at a higher valuation, even more of the specific form of income only they cab earn.


1) Let’s take a quick look at the historical record of the percentages of taxes paid by the corporations v. individual earners.

The graph below from the Forbes magazine paints a few telling stories:

[Source: Forbes]

To sum up the data in this graph, since about 1944, we the individual taxpayers have steadily paid between 45% and 50% of all income taxes, while the corporations have seen a steady decrease in their tax contributions, from about 40% to 10%. The trend is clear. Corporations are winning the tax battles, and we the workers have been losing consistently, one tax ‘reform’ after another, for the last seven decades.

Another revealing set of figures comes from a chart prepared for a Tax Policy Center analysis, in which we find that the income taxes paid by corporations in 2016, for example, amounted to about 18% of the amount paid by individuals; in other words, for every $100 we chipped in, they put in $18. With Trump’s tax plan, they’ll get to contribute even less, while we’ll have to contribute more (and increasingly more so by 2027).

In the above-mentioned chart prepared by the Tax Policy Center, we also find that the last time corporations paid more income taxes than individuals was the year 1943.

2) Now consider the fact that different types of earnings are subject to different rates of taxation. There are many levels of tax brackets, but there are two types of (legal) earnings, according to the current tax laws: Financial earnings v. wage earnings. Income tax rates for workers range from about 15% to about 40%, while capital gains tax rates start from zero and max out at 20%, or a bit more depending on the investment.

As a September 2017 Bloomberg article summarizes it, “This isn’t some quirk of the U.S. tax code. Politicians have intentionally set tax rates on wages much higher than those on long-term investment returns … Americans with so-called unearned income—qualified dividends and long-term capital gains—get a break. A billionaire investor can pay about the same marginal rate as a $40,000-a-year worker, a fact Warren Buffett has famously lamented.”

The proposed tax plan by the Republicans will not only lower the tax rates on capital gains, it also makes is easier for top earners to qualify more of their earnings for lower rates of taxation.

3) Meanwhile, there are tax havens that are available only to the top 1%. A New York Times series report regarding the leaked Paradise Papers sums up the scale of money hidden from taxation: “The United States loses … close to $70 billion a year in tax revenue due to the shifting of corporate profits to tax havens. That’s close to 20 percent of the corporate tax revenue that is collected each year.”

The descriptions of how multinationals use internationally recognized laws to move cash away from any taxation are various and the readings in The New York Times’ series (including a revealing one on Apple) make for instructive reading.

Just in one example, presented in language (and graphics) easily understood by a layman like me, we learn how in one year Google redirected incomes worth $15.5 billion through Google Ireland Holdings (incorporated in Ireland, but ‘managed’ in Bermuda, where it “employs only a handful of people there.”), thereby completely avoiding any taxation for those billions in earnings. Another egregious culprit is Apple, parking close to $240 billion in earnings overseas.

These tax havens translate into a significant further reduction of the taxable population.

4) Destruction of certain kinds of wealth (owned by middle income, working people) and the demolition of social services (for everybody who earns by working, and the poor) will be the direct result of Trump’s tax plan. That’s the most primary intent of this tax plan.

For an example of how certain kinds of wealth can be destroyed systematically through mere legislation, consider the elimination of deductions on mortgages. Home ownership is marketed as the American Dream. The elimination of deductions on mortgages will naturally result in a higher cost of maintaining a home, thereby reducing the value of the homes owned by individual earners, while making home ownership harder to attain.

Given the fact that most individual homeowners have fixed incomes, increases in the costs of home ownership will result in reduced spending in other areas, which in turn will lead to a dip in aggregate demand. That would result in increasing recessionary pressures, as economists would put it. This is yet another form of wealth destruction that will keep trickling down.

An indirect (maybe intended) benefactor of the increase in home ownership costs is the investor in the rental market. A footnote to the ‘recovery’ in the housing market has been this: most of the houses that were swept up in the last foreclosure catastrophe (brought about by the banks) were … well, bought up mostly by the banks and investors, American and otherwise, at a fraction of the prices those houses had closed for in the original mortgages. Those houses have now moved to the rental side of the housing market. Since the housing crash, mortgages have enjoyed low interest rates, so mortgage payments remain steady, and in fact go down slowly in monthly payments as homeowners pay off their mortgage and as the interest portion goes down steadily.

Rents however have been steadily rising for the past decade, benefiting the corporate investors, who are now collecting more from renters than they would have in mortgage payments from home buyers.

That’s just one example; the wealth destructions intended by this tax plan go further. According to a thorough analysis by Jack Rasmus (CounterPunch, Nov. 13, 2017) the actual amount of budget deficit this tax plan will create over the next ten years is over $4.5 trillion, and not the $1.5 trillion its architects are projecting.

In terms of how much the largest corporations will benefit from all the proposed cuts coming their way, Rasmus’s conclusion, based on a review of available public records, Congressional analyses as well as those by reputable tax analysts, is clear:

“All [the intended benefits] amounts to a total tax cut windfall for US multinational corporations of at least $500 billion, and likely even hundreds of billions of dollars more over the coming decade.”

But, who pays for this windfall for the corporations? Here is a partial list (readers are encouraged to read the full Rasmus article for a more complete list and explanations for each item):

* Reduction of Personal Exemptions and Standard Deductions = $1.6 trillion tax hike for working families over the next decade

* Elimination of Itemized Deductions = $1.3 trillion tax hike for working families over the next decade

* Other major tax hikes on the working families come in the form of:

a) Elimination of Alternative Energy Credits = $12.3 billion a year

b) Elimination of Adoption Credits = $3.8 billion a year

c) Elimination of Flexible Health Savings Accounts and Elderly Dependents Expenses = $540 billion a year

d) Elimination of Education Credits = $65 to $95 billion over the next decade

As the reader can see, the proposed tax plan will nickel and dime the working families, so as to hand over a gigantic amount of public money to the corporations and the top 1% of the earners.

Rasmus further explains that the elimination of just three capital income tax loopholes currently enjoyed by the corporations would have paid for the tax breaks corporations are receiving:

“If Trump-Ryan really wanted to raise taxes, instead of targeting the middle class, they could have easily raised $2 trillion by ending just two other programs: Eliminating the preferential tax rate for long term capital gains taxation … and ending the practice of foregoing all taxation on stocks transferred at death, for which recipients of the stock pay no taxes whatsoever.”

Also, the elimination of corporate tax deductions for payments made into company pensions and health insurance plans would result in another $2.5 trillion in tax revenues. Rasmus asks rhetorically: “Workers don’t get to deduct their contributions to these plans. Why should employers?”

Another instance of two different deductions for the same items, but for two classes of people.


The bottom line of the tax proposals making their way through the U.S. Congress is to reduce the value of the type of wealth working people can accumulate. At the same time, the ruling elites aim to reduce even the possibility of the accumulation by others of that lesser type of wealth, in the first place. Corollary to that is a raise given to the value of the type of wealth that only corporations and the top 1% can earn.

We have reached a more savage stage in late capitalism’s development, whereby the capitalist classes have gone boundlessly rabid and are holding entire societies for ransom, from Greece to the U.S., demanding to be paid more as they provide fewer services and protections.

The question for us is: Why should we keep paying? Should we not strike? If ‘strike’, how? There is strike, and there is strike back. What can we do to combat this monstrosity of increasingly higher taxes for working people, minus political representation?

As relates to taxation, two simultaneous demands must be raised. First, and as the left has been advocating for decades, we need to mobilize and agitate for a tax rate that reflects the actual benefits drawn from the infrastructure: Those who benefit the most from the infrastructure must pay the highest tax rates. There has also got to be a minimum tax for the top income earners, and a graded, increasingly higher level of taxation on incomes exceeding a few millions.

Further, the rates of taxation on the rich and the corporations need to be sufficient to provide for healthy levels of support for all necessities of life for all citizens. Top taxation rates for corporations must reflect their incomes and profits, in at least the same proportion as tax rates for workers. The same must apply to rates of taxation on all forms of earning, regardless of whether gained through working or investing. Ideally, there also has to be a maximum income allowed, after which taxation rates should automatically reach 100%, or close to it.

Second, it is not enough to settle on a fair and just apportionment to each class of earners the percentage of taxes that must be paid.

Imagine that the corporations paid 90% of their income in taxes, as did the top 1% of earners; and imagine that people making under $30,000 paid zero in taxes, as corporations and the rich paid all their taxes, with all the loopholes closed. At the same time, imagine that all the extra tax revenues went toward more war making abroad, more R&D into weapons of mass destruction, more surveillance and keeping a close eye on citizens for any signs of dissent; and nothing else. What are the benefits of such a progressive taxation?

On a second front, we must simultaneously organize with the aim to change the public expectations regarding how our taxes are spent, and who decides how taxes are spent. We can, and must, advocate for a tax system in which, as I have been arguing, we the taxpayers directly decide how (at least) 50% of our tax revenues should be spent. How the other half (or less) of tax revenues is to be spent can be decided by the legislative representatives. We can start to organize the move for this initiative at the state level, especially in states in which ballot initiatives are allowed, and, in time, we can persuade progressive leaning candidates to endorse this demand. In the medium term, it is possible to change the public expectations regarding taxation. There are alternatives to the current system.

Trump administration’s visibly vicious attacks have been ongoing from day one. Although lacking any major legislative victories, they have managed to undo plenty of small yet positive measures that had gone into effect during Obama’s eight years in office, especially with regard to environmental regulations. The Republicans have already changed the face of the judiciary at its highest level, and are working their way down the hierarchy. On other fronts, they have depleted the EPA of resources, and have gutted regulations protecting people’s air and water already, and they are not stopping there. As for giving away public goods, they intend to hand the Internet over to giant telecoms, and the schools to private equity firms. In good time, they may even succeed in handing Social Security funds over to the Wall Street.

In terms of long term and long lasting damage, though, the tax proposals they are pushing through the Congress will harm the social fabric on a scale that will take decades to recover from. There will be wealth destruction to equal that of a never-ending war, which this tax plan actually amounts to.

Reza Fiyouzat may be contacted at: