The Republican Party seems to have a litmust test for 'good' Republican nominees for party office:
- first, tax cuts: Republican candidates must have no plan to increase taxes, even if that means that the wealthy pay too little and the poor too much;
- second, deregulation. Republican candidates must have no plan to have the government regulate the activities of the market (that will not regulate itself) in ways that favor the long-term wellbeing of ordinary Americans; and
- third, militarization: Republican candidates must have no plan to reign in the exorbitant military/defense/homeland security spending that has been a large part of the reason for our buildup of significant deficits; and
- fourth, privatization: Republican candidates must not resist privatization of every possible public asset and activity.
Readers will recognize the four-pronged stool of the Reagan administration and the right's agenda since--deregulation, militarization, privatization, and tax cuts. We've been operating more or less under that agenda most of the time since 1980. We have not created a sustainable economy that benefits everyone. Instead, we have created a highly unequal society in which those at the top gain incredibly and those in the middle are squeezed down towards the bottom, while interminable wars get waged and environmental degradation continues at rapid pace. Ordinary Americans lose out in this 'brute capitalism' endeavor which gives most of the rewards to those already holding most of the wealth and furthers a "corporatist" society in which everything caters to business while ordinary people's needs go unanswered.
Jon Huntsman's so-called "American Jobs Plan" fits the mold.
On taxes, Huntsman wants to
1) eliminate deductions and lower rates to 8%/14% /23%.
2) Eliminate the AMT
3) Eliminate taxes on capital gains and dividends
4) Reduce the corporate tax rate to 25% from the statutory rate of 35%
5) shift from a worldwid system to a territorial one
6) enact a tax repatriation holiday
That scheme represents class warfare on the poor and middle class, for whom a tax bill of 8 or 14% of income, respectively, could be devastating. You really can't simplify the tax code for the 70% of people who take the standard deduction except by removing provisions that may benefit them if they qualify (medical deductions, etc.). Eliminating the AMT is extraordinarily costly, and doesn't "penalize ... small businesses" as the Huntsman plan argues. Meanwhile, the wealthy--who own most of the financial assets (stocks and bonds) and get most of the capital gains and dividend income that Huntsman wants to make tax free, benefit extraordinarily. Our tax code already favors investment income heavily--we should move in the opposite direction and tax investment income no differently from labor income. Otherwise, we create an enormous privilege for those who already own capital and have investment income, while disadvantaging those who must earn a living from labor and now become the ones required to carry on their backs the entire federal government enterprise.
Huntsman's argument for zero taxation to capitalists' investment gains is on one hand the same old hat of "let's favor capital over labor" based on the failed market theories of the Chicago school that taxing capital gains deters investment. But that's absurd on its face. The wealthy who own most of the financial assets do not stop investing in those financial assets because of taxation--if so, they would switch from financial assets to operating assets and stimulate the economy. Regretably, taxation doesn't have that much of an effect. They continue right on investing in capital assets.
Further, Huntsman makes a 'double tax' argument that shows how little he understands about the existing arguments about taxation of capital gains. He says "[b]ecause dollars invested had to first be earned, they have already been subject to an income tax [and] taxing these same dollars again when capital gains are realized serves to deter productive and much needed investment in our economy."
But it is not the "same dollars" that are taxed when capital GAINS are realized--tax basis protects the after-tax dollars invested and the amount taxed is the GAIN over that amount that has accrued to the investment. The 'double taxation argument has a little more heft when made about dividends paid by corporations, but again much of that is based on the starting point. Once we decide that corporations are persons that are taxpayers, then it is not proper to say that dividend taxation represents 'double' taxation. Corporations are taxable entities and pay tax on their income. They may then pay amounts out of that to shareholders who are also taxable entities and the shareholders will pay taxes as well (unless they are corporations, which generally get a 70-80 or 100% dividends received deduction). But that is not really any different from the fact that I as a professor pay tax on my income and may pay amounts out of that to workers in my household who are also taxable entities and the workers will pay taxes as well. The only reason it seems that the capital investment is different is because the Code has created a category of capital versus ordinary assets and distinguishes the rate on them. And because one of the taxpayers in the corporate situation is an artificial entity--but one that we recognize as a 'person' under the Constitution entitled to even free speech rights.
Furthermore, Investment gains and income earned through non-corporate entities of course have been subject to NO tax at all, since noncorporate entities are not subject to corporate taxation, and the gains beyond the after tax investment would be allowed to escape with zero taxation in Huntsman's scheme.
Huntsman's argument for reducing the corporate tax rate is equally nonfactual. He states that "The United States cannot compete while burdened with the second-highest corporate tax rate in the developed world." This is bunk--the statutory rate is not the actual rate paid by corporations. Most corporations pay no tax, and those that do pay tax already pay a rate of 25% or lower. So IFF it is really important to help US multinationals compete with other US multinationals and other country multinationals (which is itself a doubtful proposition) and IFF a 25% tax rate makes corporations competitive, the our corporations are already sitting pretty. The US is in fact a tax haven for corporations, according to the OECD's analysis of developed countries US corporations pay a very small share of taxes these days-the corporate tax take has shrunk from about 40% of GDP to less than 3%.
The switch to a territorial system is another element that favors the corporatist agenda, as is the repatriation holiday. See earlier postings. Corporations have plenty of money that they can invest in the US right now; Repatriation isn't likely to increase investments but rather to amount to a windfall. Repatriation didn't do anything to increase jobs in 2004 and it won't again. Repatriation led the companies that repatriated profits in 2004 to keep even more profits outside the US (expecting a second 'one-time-only repatriation'). There is simply no good reason to do another repatriation tax holiday.
Huntsman then goes on to propose deregulation. Note that he wants to
- eliminate Dodd-Frank. We had a near Depression because we eliminated Glass-Steagal, and Huntsman wants to go back to the "banker take all the gains/society take all the losses" mindset of financial speculation that nonregulation of derivatives led us to.
- undo the baby step towards health care reform. Sure, we should have enacted Medicare for all, a single-payer system like every other advanced country in the world already has. But deregulating health care got us into the mess we are in--it certainly won't cure the mess.
- "dramatically reign in the EPA". IN a country where corporate will has destroyed wetlands, denuded forests, and bulldozed mountaintops into creeks, Huntsman wants to let the corporate giants operate with no agency to protect the environment. He particularly objects to protecting the ozone layer--that 'little' issue of whether we even exist as a planet that supports life or not...
- "curb" independent agencies like the NLRB. Huntsman says the NLRB "destroys jobs"--in other words, we are supposed to be willing to have sweatshop conditions in order to have any jobs at all in the corporatist culture, rather than having jobs and protecting workers.
- "streamline the FDA". that favors Big Pharma and the investors, who want to be able to foist new drugs on patients without the painstaking clinical trials currently required
Huntsman thinks privatizing Fannie and Freddie will stabilize the housing market. Allowing modification of mortgage loans in bankruptcy would go much further to doing that. And "privatization" of Fannie and Freddie would have to be handled correctly to avoid a windfall from the existing public guarantee. Better to simply wind them down and let them go out of business. If anybody wants to run a Fannie equivalent, let them start it up themselves from scratch.