tax bill

The Republican Party is now aggressively pitching a tax bill that largely benefits the rich. But some of America’s richest people think it’s the wrong approach.

On Thursday, Republicans rolled out their tax bill — which was authored by seven men who have a combined net worth of $4.29 billion — as a boon to the American middle class that would supposedly spur economic growth by slashing tax rates for both big and small businesses.

However, Morris Pearl, a former managing director at BlackRock (the world’s largest asset management firm) who now serves as chairman of the Patriotic Millionaires, told Grit Post in a phone interview that the philosophy behind Trump and the GOP’s proposed tax bill is not reflective of economic reality.

“If you give the very wealthy people a tax break, well, they’re already spending as much money as they want. So that will not really help businesspeople,” Pearl said. “We think tax reform should be for the benefit of the 99 percent, and is not needed for the benefit of the 1 percent.”

Even though the tax code will be simplified if the legislation passes, there’s enough in the tax bill to worry anyone concerned about income inequality or the federal budget. As University of Southern California law professor Edward Kleinbard astutely noted, the bulk of the tax cuts proposed would go almost exclusively to the super-rich:

What does the Republican proposal do in this case? It eliminates the [Alternative Minimum Tax]. It subjects income derived from pass-through businesses like Donald Trump’s empire to a special 25 percent tax rate (rather than 35 percent or 39.6 percent, the individual rate), because owners of these businesses are special, in some indeterminate way. And the proposal repeals the estate tax.

Here you see the real agenda at work. When it matters, the proposal has more than enough detail to signal to President Trump and the Republican Party’s coterie of oligarch financial backers that their personal taxes will be slashed, not by a few hundred or thousands of dollars, but by millions and millions.

And even though the White House is promising that middle class households would see a reduction in their tax burden, University of Chicago tax law professor Daniel Hemel suggested that the “cuts” are actually a tax increase after crunching the numbers. Because the Trump proposal reduces the number of income brackets to just three, with the lowest bracket being 12 percent instead of 10 percent, a family of four making $45,000 per year would actually see their tax burden increase by more than $900 prior to credits.

Instead of pursuing passage of a tax bill that primarily benefits the wealthy, Pearl and his group of several hundred other millionaires are calling on the Trump administration to increase their tax rate, saying the most patriotic thing a wealthy American can do is pay their fair share of taxes.

“Paying taxes is one of the things we do to help run the country. That’s why they called the initial parts of the country commonwealths,” Pearl told Grit Post. “We need common wealth. That’s how we get things done, by working together.”

“Each person’s contribution to that common wealth is called a tax,” Pearl continued. “That’s what patriotic people do, they put their money together with other patriotic people and they get things done to help the country, whether its raising an army or creating a park or building a hospital or a highway or whatever it is they happen to need done.”

House Speaker Paul Ryan (R-Wisconsin) was one of the so-called “Big Six” in charge of writing the GOP’s tax bill (joined by Sen. Mitch McConnell, Rep. Kevin Brady, Sen. Orrin Hatch, Treasury Secretary Steven Mnuchin, and National Economic Council director Gary Cohn). During a CNN town hall in August, Ryan referred to the U.S. tax code as “the worst, the least competitive tax system in the industrialized world” and called for the corporate tax rate to be reduced from 35 percent to 20 percent, citing the lower corporate tax rates of other Western countries.

But Morris Pearl, who had a long career on Wall Street prior to leading the Patriotic Millionaires, pointed out that the effective rate for multinational corporations was already at rock-bottom levels, due to inventive offshoring schemes employed by corporations like Starbucks. He added that if the U.S. lowered its rate, other countries would simply follow suit.

“The answer isn’t to be in a race to the bottom, in a race that we can’t win,” Pearl said. “The answer is to make the people who really do make a lot of their money in the United States, whether its Apple or Starbucks, companies that make a lot of money selling stuff to Americans here in America, pay their fair share of taxes.”

“These people are not the job creators. And it’s ridiculous that they should pay a lower tax rate than everyone else,” he added.

Because so many large corporations have gotten so adept at stashing their U.S. profits in overseas bank accounts, corporate tax revenue as a percentage of GDP has dropped to just 2.2 percent, according to data from the Organisation for Economic Co-Operation and Development (OECD):

Pearl told Grit Post that the GOP proposal was inherently flawed due to its assumptions that corporations would create more jobs with a lower tax rate, and that businesses would close up shop in the U.S. and move overseas due to high tax rates.

“Business people are generally relatively greedy, and make as much money as possible,” Pearl said. “If you lower their tax rates, yes, that will increase their profit and the amount of money they get to save. But nobody has ever said to me, ‘Oh, taxes are so high, I’d rather make zero than only make 65 percent of whatever money we’re making.'”

The Patriotic Millionaires — whom former President Barack Obama enlisted to help lobby for the “Buffett Rule” — are instead calling for legislation that increases the rate paid by the wealthy, while simultaneously cutting taxes on the poor and middle class. Pearl said a more progressive tax code would be more beneficial for corporations due to the influx of new money spent in local economies.

“People who make more money should have higher taxes than people who make less money,” Pearl told Grit Post. “The people who make the least amount of money — poor people — they pay very little taxes because they can’t afford to pay any more taxes. If we give them a break, and even less taxes, then they will spend more money, and that will help businesspeople… Progressive policies are actually very good for business.”

 

Carl Gibson is the publisher of Grit Post. His work has previously appeared in The Guardian, Al Jazeera-America, NPR, The Washington Post, and others. Follow him on Twitter @crgibs or email him at carl AT gritpost DOT com.

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