In explaining his new tax proposals, which feature massive tax cuts for the rich and for corporate America, Jeb Bush told voters in North Carolina Wednesday that it’s time “to let the big dog eat.”
I happened to be watching live when he said it, and I was stunned at how tone deaf the statement was. While the economy has its long-term issues, I don’t believe that a shortage of food for the big dogs is among them. To the contrary, “the big dogs” have seldom been so fat and sassy.
Corporate after-tax profits — let me stress that “after-tax” part — are at an all-time high. The share of the economy ending up in the paychecks of working Americans is at or near an all-time low for the almost 70 years in which we have data. The share of our national income going to the richest 1 percent is now at levels not seen since before the Great Depression, which conversely means that the share going to the 99 percent is at its lowest point since before the Great Depression.
“We need to let the big dog eat”?
To be both fair and accurate, Bush’s plan does cut taxes for almost everybody. He would double the standard exemption and increase the Earned Income Tax Credit for lower-income families, exempting an additional 15 million households from paying income tax. According to his website, “More than 42 million middle-class families will get a 33 percent cut in their income tax rate, and a family of four earning less than $40,000 will face no federal income tax whatsoever.” That’s all well and good, although I’m dubious about the willingness of congressional Republicans to go along with such a program.
However, the big dog’s share of the Jeb tax cuts undoubtedly go to the big dogs. The tax rate charged to the wealthiest of Americans would drop from 39.6 percent (now imposed on income above $413,201) to 28 percent. The capital gains tax on investment income would be slashed. The estate tax — currently charged on just two of every 1,000 estates — would be dropped altogether. The corporate income tax rate would drop from 35 percent to 20 percent, and the tax on overseas profits would be dropped altogether. According to an analysis by The New York Times, changes in the income tax alone would give a taxpayer earning $10 million or more an average tax cut of $1.5 million.
And where is all this money going to come from? Will kibble for the big dogs just fall down out of the sky?
An analysis by Bush’s own team of economists acknowledges that if scored by traditional, straight-forward accounting methods, his plan would increase the deficit by $3.4 trillion in its first decade, on top of already anticipated deficits. However, a Bush spokesman dismissed that approach as “antiquated” and “irrelevant, except to partisan liberals who think that we can tax our way to prosperity.” Instead, after accounting for all the growth that the plan is sure to generate, they estimate its true revenue impact at $1.2 trillion.
As we know, however, such trickle-down projections simply do not come true. They haven’t come true in Kansas, and they certainly didn’t come true when Jeb’s brother made very similar promises about his own tax cuts. ** It’s mumbo jumbo.
But let’s play the game for a moment. Let’s accept the lower but still substantial estimate of $1.2 trillion in reduced federal revenue. Where’s it going to come from? Jeb is already on record as proposing considerably higher military spending, so that’s off the table. In its analysis, the Bush economics team proposes instead to finance their tax cuts with unspecified “entitlement reform” — meaning significant cuts in Medicare, Medicaid, Social Security.
In short, we’ll be financing tax cuts for the rich by cutting social programs, at a time in our history when the rich have never been doing better and a lot of Americans are still struggling. And why? Because “we need to let the big dog eat.”
** Back in 2001, President George W. Bush promised that using “extremely conservative” growth assumptions, his proposed tax cuts would so invigorate the economy that the country would produce a budget surplus of $5.6 trillion over the next decade and be able to “retire nearly $1 trillion in debt over the next four years… the largest debt reduction ever achieved by any nation at any time.”
But the promised growth did not occur, the surpluses vanished and instead huge deficits returned. Instead of the projected surplus of $5.6 trillion, we got deficits of $6.1 trillion, a swing of $11.7 trillion according to the Congressional Budget Office.