1. Politicians promised tax reform is about you. It’s not.
Virtually every politician pushing the tax bill stressed its primary purpose would be to deliver tax relief to all Americans, especially those in middle class. That’s logical, since we’re the ones they’re supposed to be representing.
Here’s President Donald Trump from a speech on Dec. 13:
We want to give you, the American people, a giant tax cut for Christmas. And when I say giant, I mean giant. … It’s a massive tax cut for the middle class.
No, Mr. President, it’s a massive tax cut for corporations.
According to Bloomberg, the actual tax relief for individuals earning between $40,000 and $100,000 will be between $15 and $23 a week. Corporate tax rates, on the other hand, will be cut nearly in half, from today’s maximum of 35 percent to a new maximum of only 21 percent.
In addition, while the tax cuts accruing to regular Americans automatically go away after 2025, cuts for business are permanent.
From Consumer Reports:
The main focus of both bills is a huge cut in corporate taxes … For individuals, the two pieces of legislation offer more modest and less permanent breaks.
Even some Republicans acknowledge whom this bill is really for. Here’s what Republican Rep. Mark Sanford of South Carolina said:
Fundamentally the bill has been mislabeled. From a truth-in-advertising standpoint it would have been a lot simpler if we just acknowledged reality on this bill, which is it’s fundamentally a corporate tax reduction and restructuring bill, period.
The new law also contains a provision allowing corporations with profits stashed overseas to bring them back to the U.S. and pay as little as 8 percent in taxes. That’s a lot less than you’ll likely pay on your income, and a pittance compared with the maximum rate of 35 percent they were facing prior to this law.
This is an idea that’s been trotted out before, and not very long ago. From CNBC:
In 2004, companies were allowed to bring their profits back home at a tax rate of 5.25 percent. But rather than pump that money into the economy, most of it went to shareholders, with some of the biggest recipients actually cutting employment in subsequent years.
For decades the corporate share of the American tax burden has been shrinking. As independent Vermont Sen. Bernie Sanders pointed out a few years ago, corporate taxes made up 33 percent of all government tax revenue in 1952. By 2013, corporations were contributing just 10 percent of the total.
After passage of this tax bill, their share will shrink more.
Lesson: Politicians are sometimes more focused on rewarding lobbyists and donors than you.