Letter: Rich man’s world

Published: 2/18/2019 1:50:36 PM
Rich man’s world

On Dec. 22, 2017, Donald Trump signed into law the Tax Cuts and Jobs Act. Trump justified the tax cuts stating, “America is the most highly-taxed country in the world.” According to economist Paul Krugman, of the 35 countries that make up the Organization for Economic Cooperation and Development (OECD,) the United States is fifth from the bottom concerning taxation. The average tax for OECD countries is 34.3 percent, while the United States average tax is 26.4 percent.

Corporate tax rates were lowered from 35 percent to 21 percent to spur corporations into raising wages for American workers. According to Chris Macke of The Hill, Trump claimed that the tax cuts would generate between $4,000 to $9,000 per year in pay increases. Instead, workers received a raise of $6.21 per week.

Why such paltry pay increases when the economy is booming? Corporations decided that using 1.1 trillion dollars in tax savings (2018) was better spent on stock buyback programs. Yes, programs that enrich the wealthy but do zero for hard working Americans.

For years corporations have utilized tax schemes to avoid paying taxes. One such tax scheme was creating tax shelters in Bermuda, Barbados and the Cayman Islands. Corporate headquarters were paper transferred to mailboxes on these islands while the physical headquarters remained in the United States. This move allowed corporations to avoid paying the 35% tax rate. While Americans dutifully pay their taxes, corporations shirked their tax obligations.

How much money have corporations squirreled away in these tax havens? According to investigative reporter, David Cay Johnston, in 1988 the Internal Revenue Service measured the tax gap in America. The Tax Gap is: “the difference between the taxes that would be paid if everyone obeyed the law and what is actually collected...in 2003 the tax gap would be approaching $200 billion. Given the growth in the selling of schemes to evade taxes, tax experts have said that $300 billion is a cautious estimate for 2003.” Corporations owe trillions of dollars in back taxes.

Social Security is a retirement plan for the working class. By 2034 it will run out of money. How did Social Security get to the point of insolvency? Per David Cay Johnston “From 1984 to 2002 the government collected $1.7 trillion more in Social Security taxes than the agency paid out in benefits.” So how did a surplus turn into a deficit? Johnston stated that “In the two decades beginning in 1983 the government has spent almost $5.4 trillion more than it took in. The reason that government debt grew by only $3.6 trillion was because of those excess Social Security taxes that were used to finance income tax cuts for the rich.”

Main Street bailed out Wall Street during the “Great Recession” of 2008. What was the working class’ return on their investment? Workers received miniscule pay increases and $3.8 trillion more debt. Who says this isn’t a rich man’s world?

Paul Guimond

Royalston


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