Corporations are people, my friend. Both Mitt Romney and the Supreme Court told us so years ago.
Still, they left out one key fact: It’s way better to be a corporate-person than a person-person. At least when Republicans are reshaping the tax code.
Republicans love cutting taxes. They’d cut all the taxes in the world if they could. But the rules that allow senators to pass their tax agenda with only 51 votes require setting priorities for who gets the most generous cuts, or any cuts at all. This week, the party made its top priority abundantly clear.
It chose corporations. By a long shot.
Both the House tax bill — which passed handily Thursday — and the Senate version are heavily weighted toward business. Both bills would slash rates on regular corporate profits, “pass-through” business income (currently taxed at regular individual rates) and overseas profits that get repatriated. They also provide other tax breaks for companies, such as allowing full and immediate expensing for qualified investments.
Of course, Republican lawmakers and administration officials promise that these corporate giveaways will really, truly, honest-to-goodness primarily benefit us regular humans, especially humans in the middle class.
That’s because, they claim, corporate tax cuts will unleash a wave of business investment and therefore economic growth, most of which will trickle down to the little people-people.
It’s hard to find an independent economist who buys this. Even corporate executives won’t back up this story.
At the Wall Street Journal’s CEO Council meeting this week, a Journal editor asked audience members to raise their hands if their companies planned to invest more should the tax legislation pass. Only a smattering of hands went up.
Gary Cohn, the director of President Trump’s National Economic Council, looked out at the crowd with surprise.
“Why aren’t the other hands up?” he said, laughing a bit.
This was no one-off embarrassment. A survey of 300 companies this summer similarly found that a tax holiday on the repatriation of overseas profits was more likely to lead to share buybacks, mergers and paying down debt than investment and hiring.
It gets worse. The Senate plan isn’t just more generous to companies than it is to individuals. It effectively takes from low- and middle-income individuals to give to corporations.
The Senate bill makes the corporate rate cuts permanent. Which is expensive. So expensive, in fact, that the cuts would cause the bill to run afoul of those rules that allow passage with a simple majority vote.
Senate Republicans came up with a solution, however. To offset the cost of those corporate cuts, they did a few things that hurt individuals.
First, they decided to “sunset” — that is, make temporary — nearly all of the goodies for households, such as the doubling of the standard deduction and expanding of the child tax credit, in their bill. Further, they changed the way that individual tax brackets are calculated so that households move into higher marginal rates more quickly than they do under current law.
Finally, they added the repeal of the individual health-insurance mandate, which would have the not-very-intuitive effect of reducing tax subsidies for lower- and middle-income Americans, some of whom will cease buying health insurance without the mandate.
The net result of these changes: Over time, fewer American households get tax cuts. In fact, as of 2021, households making $10,000 to $30,000 would see their taxes go up on average, according to a report released Thursday by the Joint Committee on Taxation, Congress’ nonpartisan internal analysis shop.
And, by 2027, every income group under $75,000 would experience tax increases, on average, relative to what they would pay if Congress left the law unchanged.
This doesn’t even account for other effects of repealing the individual mandate that would also hurt many human-persons. Premiums, for instance, would spike, as healthier and younger people dropped out of individual insurance pools.
Nor does it include the fact that passing tax cuts this year would trigger automatic cuts to Medicare starting in January. Not a decade from now, or five years from now, but January. Overriding these cuts would require 60 votes in the Senate.
Perhaps because the legislative process has been so rushed, many senators don’t appear to even know that these cuts are in the offing. Even so, when given the opportunity to vote for an amendment explicitly ruling out cuts to Social Security, Medicare and Medicaid if their tax bill blows a hole in the budget, Republicans voted no Wednesday.
Person-persons, rather than corporate-persons, may still be the ones who vote. But they’re clearly not Republican lawmakers’ most prized constituents.