Who Pays for Tax Cuts?

THIS TAX DAY, some middle-class Americans may be tempted to celebrate. Under the new law approved in December, the bottom 60 percent of earners (those making less than $86,100 a year) are expected to receive 2018 tax cuts worth $407 on average.

But if you think you’ll be among those who owe Uncle Sam less under the new law, don’t get your party hat out yet. These tax cuts come at a high price.

For example, a typical preschool teacher (single, with no children) who makes $30,000 per year can expect a tax cut of $457. That’s enough to pay for a new refrigerator or several months of electricity bills. But other changes to the tax code could put this teacher’s job in jeopardy. State governments have been expanding pre-K programs in recent decades, but many of them are expected to have their education budgets squeezed because of the new tax law’s caps on state and local tax deductions.

In the meantime, the preschool teacher could have more hungry children in her classroom. The new tax law reduces incentives for charitable contributions, including for food banks and other services that early-childhood programs rely on. Donations to nonprofits are expected to drop by as much as $20 billion this year, according to the Tax Policy Center.

What about middle-class families who are making significantly more than the typical preschool teacher? Let’s look at a couple who run a plumbing business in Louisiana, with $135,000 in joint income. The Tax Policy Center estimates they’ll get a tax cut of $609 in 2018. But that same couple can expect to be slammed with a spike in their health insurance premiums of $1,900—triple their tax cut! That’s because the new tax law repealed a key part of the Affordable Care Act that requires individuals to have health coverage if they can afford it. This could lead to an estimated 13 million more people becoming uninsured and huge increases in premiums for those who remain in the individual market.

These are just some of the immediate effects of a tax law that overwhelmingly favors the wealthy and big corporations. In the longer term, the costs to working families will be much more painful.

Individual tax cuts are scheduled to expire after 2025, while the big-ticket item in the new tax law—the slashing of the corporate tax rate from 35 to 21 percent—is intended to be permanent. This huge giveaway to corporations will cost $1.4 trillion over 10 years, which Republicans would like to pay for through cuts to Medicare, Medicaid, and other vital public services. The GOP budget proposal includes $473 billion in cuts to Medicare and $1 trillion in cuts to Medicaid.

While this Tax Day offers little for most Americans to celebrate, thanks to the new law big corporations will have piles of money they no longer have to contribute to boring stuff like schools and bridges.

What are they planning to splurge on? For Imelda Marcos, it was shoes. For these guys, it’s stock buybacks. This shady financial maneuver artificially inflates the value of a company’s stock, which is guaranteed to put wealthy shareholders and executives in a festive mood while doing nothing to benefit workers. So far, corporations have announced plans to spend more than $70 billion on these stock buybacks.

Of course, today’s corporate executives have learned that to stay on top, you’ve got to show a bit of concern for the little people. That’s why some corporations are handing out employee bonuses. Unfortunately, these checks for lower-level employees—just like their tax cuts—are a temporary perk meant to mask deeper costs.

The corporate tax cuts—unless we repeal them—will feed a party for the 1 percent that never ends.