I’m going to take President Trump and Republicans at their word that what they really want to do is boost the middle and lower classes with their tax reform plan. Not only that, but I’m going to help them get everything they want. All they have to do is tackle tax reform in two phases.
Because corporations are making record profits and already paying an effective tax rate on average of 21 percent (though some pay less or zero), they likely can wait a moment for tax relief and more breaks. Meanwhile, the wealthy in America are doing better than ever, so they might can wait a moment, as well. Besides, we don’t have to look back very far in our history to find that trickle-down economics does not work. So, let’s try trickle-up economics.
Start tax reform with small businesses instead of corporations and with the bottom 90 percent or so of Americans instead of the top 1 percent. President Reagan famously noted that a rising tide lifts all boats as he pitched trickle-down economics in the ’80s. Unfortunately, it lifted all boats in a small pond. Trickle-up economics relies on an oceanic rising tide to lift a whole lot more boats, from the poor boy’s canoe (or kayak in my case) to the greedy man’s yacht.
Phase one: Eliminate income taxes on the poor. Expand deductions and credits for the 90 percent. Encourage people to enhance their education instead of discouraging it. Make it simpler for folks to fill out their taxes. Protect them from financial disasters caused by medical expenses. Help small businesses grow and encourage them to share with their employees and communities. (Unlike corporations, small businesses don’t have as much of a tendency to hoard their increased profits or benefit only their shareholders.) Expand Medicare instead of cutting it. Provide all those cool crumbs in the current bills and much, much more.
Put more money in the hands of the 90 percent first. This is a consumer-driven economy and will only grow as such. It makes sense that as the gasoline powering this economic engine, the consumers can do more with fuller gas tanks. If the 90-percenters have more money to spend, it will ultimately trickle up those at the top.
This would be phase one of tax reform. It would stimulate further economic growth and reduce spending on welfare programs. As opposed to increasing the deficit as the current GOP plan does, it likely would reduce it. If it’s a legislative victory that Trump and the GOP so crave, this would be it and it would benefit your core voters.
Put more money in the hands of the 90 percent first. This is a consumer-driven economy and will only grow as such.
Then, and only then, you could consider phase two — providing tax relief upward to those who are not struggling. Phase one would benefit your core voters, while phase two would further benefit your core benefactors and policy dictators. As this analysis shows, trying to help the rich and everyone else in one fell swoop has many negative consequences, some unintended I’m sure. Maybe later you could tackle separately such things as Arctic drilling and permitting religious institutions to engage politically instead of tacking them onto bills as the current Senate version does.
Building a house from the roof down just doesn’t make sense.