Trump’s Tax Plan: Recap

By Josh Rouwhorst

David LaGrand, Charles Ballard, and Rachel Richards

David LaGrand, Charles Ballard, and Rachel Richards

On Monday, One Michigan Alliance and Indivisible Grand Rapids hosted a forum to discuss the republican tax plan currently working its way through congress. On the panel was MSU Economics Professor, Charles L. Ballard; Legislative Coordinator for the Michigan League of Public Policy, Rachel Richards; and Michigan State Representative, David LaGrand.

The Science

Professor Ballard pointed out that economists agree releasing a stimulus bill when unemployment is so low is a detriment to the economy. We have historic evidence that when taxes increase so does revenue that we are able to use to pay down the national debt. When we cut taxes, revenues drop and we go deeper into debt. When we have a surging economy, we should be paying down debt as apposed to incurring increased levels of deficit. That way, when we have bad days we have the credit needed to see us through. Bad days such as another recession. According to the Republican tax plan we will never have another recession, despite economists saying that another recession in the next few years is likely if this tax plan becomes law.

He also succinctly explained the problem with “trickle down economics”. Studies have shown that when businesses receive cash influxes, from tax breaks or loans, they are likely to use most of those funds for stock share buybacks, paying out dividends, and mergers and acquisitions. None of which help the bottom line of workers or small businesses.

The Politics

Rachel Richards gave a detailed explanation of what this bill means for Michiganders, breaking down the differences between the Congressional tax plan and the Senate tax plan.

Who gets paid

The richest 1% in Michigan, making an average income of $1.6 million, will be receiving around $50,000 in tax cuts, while the bottom 60%, making an average of $34,100, will receive around $400 in tax cuts. Since more tax cuts for the wealthy phase in over time, in 10 years the tax cuts would lose value for every income group besides the richest, who would have an increase of more than $24,000. The rest of us could see our tax cut shrink by another $140.

The state tax deduction

One of the ways the Republicans are attempting to partially pay for the tax cuts for the wealthy is to eliminate state tax deductions. You would not be able to deduct taxes paid to the state when paying your federal taxes. This, however, would cause a strain on states and local governments to raise revenue for the services they provide.

The myth of job creation

All you need to do is look at how massive tax cuts are affecting the people of Kansas. Their Republican state government gutted their tax system, gambling that tax cuts lead to economic growth. Instead, Kansas’ growth has almost all other states. This also resulted in Kansans dealing with drastic cuts to services they need such as public education and road maintenance.

The Solution

David LaGrand provided hope for a Democratic solution in Michigan’s state legislature, proposing a progressive tax plan that sets fair rates on the income groups. He pointed out that “we are in a moment of great political awakening,” referencing the Voters Not Politicians movement to end gerrymandering in Michigan. Before this year, it was unthinkable that so many people would be passionate enough to take on a boring topic such as gerrymandering. He also suggested that everyone in the room knock doors 10 nights this next election cycle. You can easily knock on 100 doors a night, which would mean we could reach roughly 100,000 people and move our community toward Democratic values.

He also gave a word of caution, saying that crisis helps if you want to break something. By drastically cutting taxes without paying for them, the Republicans may be positioning federal finances to force us into a situation where we may need to remove Social Security or Medicaid.

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December 14th, 2017|