The Trump and Ryan tax plans are a blueprint to boost global inequality.
If there is one unambiguous message from the 2016 election results, it’s that voters across the ideological spectrum are fed up with the way our leaders in Washington have rigged the rules to boost the bottom line of the rich and powerful. There are many open questions about what issues most motivated voters in 2016, but dissatisfaction about the unsustainable growth in economic inequality surely comes at or near the top of any list.
The incoming Trump administration is already signaling that the very first thing on its economic agenda to respond to this “mandate” will be to push through massive reforms to the tax code with an emphasis on reducing taxes for large multinational corporations. With that in mind, Oxfam has combed through the tax proposals released by the Trump campaign and Speaker of the House Paul Ryan to assess whether and how their plans respond to voter’s demand to unrig the rules and address economic inequality. What we found isn’t pretty.
Don’t have time to read more? Here’s the TL/DR: The Trump/Ryan Tax plans are a blueprint to drive greater economic inequality. They further rig the tax code in favor of the wealthy and large multinational businesses at the expense of working people.
We looked at how the corporate tax reforms proposed by President-elect Trump and Speaker Ryan would affect poverty and inequality in the US and poor countries. Other groups have already shown that the tax reforms proposed for individual taxes would disproportionately benefit wealthy individuals. Here’s what we found:
- Trump and Ryan give large tax cuts to benefit the one percent and budget cuts for the poor.
Both President-elect Trump and Speaker Ryan have proposed slashing corporate tax rates for large multinational corporations well below the average rates they pay in other rich countries. In the US, the top one percent earns 45 percent of corporate income and the cost of corporate taxes are felt much more by the wealthy than by average Americans. The primary impact of reducing the corporate tax rate will be increasing incomes for wealthy shareholders and reducing revenue for the federal government. The Tax Policy Center has estimated the Trump corporate tax plan would cost $2.6 trillion, necessitating massive cuts to programs that reduce inequality like education, healthcare and infrastructure. Ultimately this means more money ends up in the pockets of wealthy people and fewer investments benefiting average and poor Americans are made. Furthermore, lower tax rates in the US may also force poor countries, which rely more heavily on corporate taxes to fill their budgets, to reduce their rates even further contributing to a mutually destructive race to the bottom that undermines basic services for everyone.
- Trump and Ryan reward the largest corporate tax avoiders.
Both President-elect Trump and Speaker Ryan have proposed a massive tax holiday to let companies pay a radically low tax rate on offshore profits they have already earned. Many large companies use the rigged rules of our tax code to hold billions of dollars in profits offshore without paying any US taxes. US companies currently have $2.4 trillion stashed offshore because of this loophole. Instead of making these companies pay what they already owe, the Trump and Ryan plans reward the companies that have dodged the most taxes.
- Trump and Ryan expand offshore loopholes.
In addition to offering a tax holiday for offshore profits that companies have already earned, both the Trump and Ryan plans ensure companies will pay lower taxes on future offshore profits. The Ryan plan goes a step further by reducing the tax on offshore profits all the way to zero. This would not only deprive the US Treasury of billions of dollars, it would also exacerbate tax competition among poor countries.
- Trump and Ryan do nothing to crack down on corporate tax haven abuse.
The US and developing countries each lose an estimated $100 billion per year because of corporate tax haven abuse. The 50 biggest US companies, including global brands such Pfizer, Goldman Sachs, Dow Chemical, Chevron, Walmart, IBM, and Procter & Gamble, use more than 1,600 subsidiaries in tax havens to avoid billions of dollars in taxes each year. When companies artificially shift profits into low or zero tax locations like Bermuda or the Cayman Islands it is an enormous drain on the US treasury and on the budgets of poor governments. Today Oxfam released a new report ranking the 15 worst tax havens and showing how they are propping up a dangerously unequal economic system that leaves millions of people with few opportunities for a better life. Yet neither the Trump nor the Ryan plan says one word about cracking down on tax haven abuse. They do not implement a single policy to improve transparency or constrain tax havens. Reigning in tax havens is an essential ingredient to unrigging the system, yet neither Trump nor Ryan has proposed to do so.
There is one through-line which connects all four of these policy choices: they each benefit rich and powerful special interests that have spent billions to lobby Congress and influence elections. If President-elect Trump and Speaker Ryan are serious about responding to the voters’ calls to “Drain the Swamp” and unrig the rules that tilt our economy in favor of special interests, they’ll need to go back to the drawing board on their tax plans.