The Republican Tax Bills Pander to 'Real America,' and That's the Problem
In 2016 the always brilliant Ron Howard produced and directed The Beatles: Eight Days a Week – The Touring Years. The documentary provides a behind the scenes look at the supergroup in its early days, and fans will not be disappointed.
But what stood out for this viewer was how much the Beatles wanted to succeed in the United States. It was everything. They expressed the view that a failure to break into the massive U.S. market would amount to failure in general. Success in the U.S. was the personification of global credibility for a band that still looked and acted provincial.
Not only had American rock ‘n roll greatly influenced the Liverpudlians, but the U.S. consumer market was the biggest in the world, by far. As the great satirist P.J. O’Rourke once put it about the U.S. economy, “We’re the big boys, Jack, the original, giant, economy-sized, new and improved butt kickers of all time. When we snort coke in Houston, people lose their hats in Cap d’Antibes. And we’ve got an American Express card credit limit higher than your piss-ant metric numbers go….” Readers can imagine where O’Rourke takes his excellent rant, and if they haven’t read it in full, they should purchase Holidays in Hell.
Applied to the Beatles, they believed what O’Rourke articulated so well. If they could make it in the U.S., they could make it anywhere. And so they did. At one point, they could lay claim to the five biggest selling singles in the U.S., which is a record that still stands today. Americans are the world’s greatest producers, and as such they’re the world’s greatest consumers. The Beatles got really rich by virtue of cracking the biggest, booming-est market in the world. Our economic growth has historically dazzled the rest of the world, and has had its greatest producers salivating at the chance to serve our needs.
Which brings us to the Republican tax bills. They’re the Beatles equivalent of making it in Portugal. The success will pay the bills or something like that, but it’s pure smallball.
About the tax cuts that aren’t, let’s be clear that the U.S. economy will still grow. It’s the nature of people – and Americans in particular – to have endless wants. Americans will still produce en masse, their Amex limits will still dwarf the rest of the world, but readers must consider the unseen; as in imagine future growth if the Republicans – in control of all three governmental branches – were actually cutting taxes. But they aren’t despite what's being said the by the bills' supporters and critics alike.
The economy will once again still grow (gridlock is great, and that’s what President Trump will get), but someday the Republicans or Democrats will truly reduce penalties on work and investment, shrink spending, and stabilize the dollar. When they do, voters will think about the Republicans of 2017 and wonder why they were so timid.
Indeed, what’s the point of electing Republicans if they’re going to shrink from doing what they were put on this earth to do: reduce taxes and spending. That’s all they’re good at, at least theoretically, but like the theater major inexplicably trying to be an accountant, the Republicans are trying to be the party of handouts and feelgood rhetoric provided by politicians, as opposed to the one solely focused on erasing needless barriers to growth.
About the GOP bills, there’s no there there as it were. Readers can expect endless cheering from the right about corporate tax cuts from 35 to 20 percent, except that the most valuable American corporations don't pay anywhere close to 35%. How does one know the previous point is true? Just read the talking points of Republicans. They’re explicit that the corporate tax already raises very little revenue as is. If the rate were at all biting, revenues from the corporate tax would be massive to reflect the immense prosperity of U.S. companies. So while what amounts to double-taxation of individual earnings (individuals own corporations, always) should logically be zero, it’s good that the existing rate raises very little.
What’s shameful is that under the GOP plan, some of our greatest corporations will plainly pay more in taxes thanks to the introduction of a “global minimum tax” foisted on corporations. Yes, you read that right. As a response to U.S. corporations “operating in low-tax countries such as Ireland, Luxembourg or various island tax havens,” the Republicans have introduced a minimum 10 percent tax on foreign profits that companies must hand over to the feds.
Congress wants these revenues to pay for lower rates on “pass-throughs.” These are largely small, domestically-based businesses. About this, the rate for all businesses should once again be zero, but in this case Republicans are penalizing the most important American businesses in order to reduce the burden on smaller ones largely situated stateside. It’s all based on the belief among Republicans that small businesses “create all the jobs.” No doubt the latter’s true in a sense, but as any reasonable analyst could have reminded the Republicans, small businesses cluster around the big ones. Their health and their ability to “create jobs” is always and everywhere an effect of big-business prosperity, but the Republicans have set about raising the penalties on the biggest, most successful, and most valuable U.S. businesses.
What about the one-time lower tax on repatriated profits? Oh please. Republicans surely know this is a nothing move, and they know this boecause they understand that the only closed economy is the world economy. The notion that $2 trillion is “stranded overseas” thanks to taxes on repatriated profits ignores that monies earned globally are banked much as are domestic earnings. Once they are they’re directed to their highest use, including the U.S. Apple has not only been “repatriating” tens of billions in foreign profits tax free through the bond market over the years, it’s been doing so while enjoying a tax deduction on interest paid for funds.
Immediate expensing for plant and equipment? It would have at least been a relevant subsidy for businesses in the early 20th century back when the greatest U.S. companies were wholly reliant on mills, factories, heavy machinery, etc. But they’re not today. The crucial corporate assets of today are people, not tractors. Goodness, the most valuable U.S. companies don’t manufacture much as is. If anyone doubts this, they need only do some research on where Apple and Nike manufacture the products they sell. They’ll soon find out that they don’t. They leave it to others. Uber’s plant and equipment is an app. Google's is a major complex housing its great minds in northern California. The list goes on. The expensing subsidy would have been a counterproductive handout in 1917, but at least it would have reflected business realities then. The subsidy doesn’t, however, reflect reality in 2017.
Individual rates of taxation on the highest earners ? Under the House plan they’re going up, while under the Senate plan they’re dropping 1 percentage point. The capital gains tax will remain the same at 23.8%. If you commit capital to a new idea and you actually enjoy a return, you’ll be penalized just as much under the Republican plan. You read that right. Even though people in the U.S. get rich by virtue of achieving amazing things, and even though they can only animate their ideas through investment, the Republicans have done next to nothing to reduce the penalties levied on the achievers, along with those possessing the courage to invest in them.
To be fair, they have a reason for not reducing penalties on the very innovators and investors who relentlessly advance our living standards and opportunity: they want to reduce tax rates for the middle class. And so tax rates will be reduced on the middle who, by virtue of being middle earners, lack the funds to invest in the companies and jobs of tomorrow, but who are reliant on those who do have those funds. In short, the Republicans will ultimately raise penalties on middle earners by virtue of their unwillingness to reduce the tax burden on the visionaries and their benefactors. Republicans as the Party of growth? Hmmm.
What it comes down to is that the Republican tax bill amounts to a big, populist pander. It’s one Sarah Palin might have written because it reduces taxes levied on “Real America” while trying to revive a not-so-ideal America of 100 years ago. The problem is that the innovators and their sources of finance - as in the people who create all the advances and jobs – are not “Real America.” They’re the dreamers, the tinkerers and oddballs who don’t necessarily fit into Palin's or the modern GOP’s idealized vision of what’s “Real.”
So in pandering to the “Real America,” the Republicans wrote a tax bill that does little to nothing to reduce the penalties on those who actually make America great. The Beatles of tomorrow will still want to please our ass-kicking consumers, but the excitement won't be as substantial. And “Real America” will suffer this change of perception about the United States.