How can I say that the GOP Tax Bill Will Hurt You? Because I will be correct if you are in a fairly large group of Americans, (99.8%) and this so-called “tax reform” passes. Economically, this is not a difficult bill to understand. President Trump, the confirmed and serial liar that he is, is claiming he will not benefit. Its a lie.
Taxes: This is a welfare bill for the already wealthy. It reduces taxes for the uber-wealthy, only 0.2% of Americans. For them there is an average $250,000.00 per year reduction in federal income tax. For EVERYONE ELSE, it is a mixed bag. At best, it reduces income taxes for about 38% of middle class Americans for a short period, maybe 7 years. For the other roughly 61%, it is tax neutral, or raises your taxes, sooner or later.
The elimination of the Federal Estate Tax is a handout to the wealthy class, and a socially disastrous and cynical move by the GOP. This welfare for the wealthy will permanently embed an aristocracy with the likes of Ivanka and Donnie Jr. Trump, Jared Kushner, and other spoiled trust fund children who do not even know how to work as the decision makers in a government purchased by the wealthy. Concentration of wealth in a few families, along with our currently undemocratic system of presidential elections is taking us ever closer to becoming like the corrupt oligarchy of Vladimir Putin’s Russia, which Donald Trump admires and want us to model and imitate.
Healthcare: The reversal of the ACA individual mandate will cost everyone more for health care premiums. This is a little more complicated, but my opinion is based upon the major changes to the health care industry after implementing the ACA. One effect will be that some Americans will once again go bare, and show up for only late stage emergency care. Those costs will be subsidized by higher premiums for everyone else. Another effect is the instability this re-introduces to the already corrupt medical insurance markets. Big Insurance will continue to profiteer by raising premiums due to their professed inability to predict costs. See “Winners and Losers Under Trumpcare” from March 15, 2017 – below on this website.
The Deficit: The 1,500,000,000.00 addition to the budget deficit will create economic changes that the former GOP Budget Hawks are ignoring with accounting tricks. This deficit will not be paid by economic growth. Trump blames the amount of foreign aid as the reason for the deficit, which is a lie.
The huge additional deficit will make it impossible to reduce the trade deficit, which is another type of deficit. The trade deficit is a problem Trump says he’s going to fix. Again, he is not smart enough for the complex analytical thinking these proposed actions require. The question is, how does the additional budget deficit effect trade? The answer is, it effects trade negatively and reduces the number of American jobs.
Here’s the economics of it: A budget deficit creates a need for additional government borrowing. The added borrowing creates upward pressure on interests rates as the government offers U.S. bonds that must be attractively priced to sell. These higher bond rates attract foreign investment, much of it from China’s, India’s, and Russia’s newly minted billionaires. They also drive up domestic interest rates as banks are forced to complete with these bond rates for deposits. These bond purchases then effect the value of the dollar which becomes even stronger. As the dollar becomes stronger, it reduces our ability to produce goods that are competitive on the world markets. Companies that cannot compete globally then reduce their output, and fire American workers, or reduce their hours of employment. We produce and ship fewer goods because the expensive dollar makes our goods uncompetitive.
Even if the “tax break” goes deeper than I think it will, the effects of a tax break without federal spending reductions will be inflationary, and cause the Fed to raise the interest rate. Adding capital to the spending economy of the uber-wealthy, and any average Americans who translate a tax break into spending and not savings, add further fuel inflationary pressures. This will cause the Federal Reserve Bank to raise its benchmark rate.
So, you lose. No matter what happens, this tax bill can ONLY add to the grossly unbalanced distribution of wealth in the USA, and reduce the meager fortunes and employment of most Americans.