Okay, this one is verging on a golden oldie, because I am, you know, very lazy, but a week or two back Glenn Kessler, the WashPost’s “Fact Checker” really got my eminently gettable goat with this post The zombie claim that the 2017 tax cut gave ‘83 percent’ to the top 1 percent. Glenn appears to have been seriously provoked when Democratic Rep. Hakeen Jeffries recently repeated the frequent Democratic “zombie claim” (“zombie” as “unkillable”) that, well, the 2017 tax cut gave ‘83 percent’ to the top 1 percent. Flourishing his green eyeshade ostentatiously and clapping it firmly on his fevered brow, Glenn launches into what he would have us believe is a full wonk’s guide to actual impact of the 2017 tax cut.
First of all, Glenn points out that Hakeem used the past tense of “go”, that is to say, “went”, which is perfectly true. Yet, as Glenn (accurately) points out, Hakeem’s claim isn’t true now, and won’t ever be true until 2027, when the corporate tax cuts, but not the individual tax cuts, will expire, a gimmick added by the Republicans to let them pass their massive corporate giveaway sans filibuster. And, Glenn notes, it’s very likely that the current tax laws will be changed significantly prior to 2027, so that 1) Hakeem’s statement isn’t true now, and 2) probably won’t ever be true in the future.
Glenn goes on to cite a good deal of data from the IRS showing that the higher brackets paid more in income taxes following 2017 than they did prior, which proves, he thinks, that Hakeem’s claim was a lot of hooey. Quoth1 Glenn
The TPC [the “nonpartisan” Tax Policy Center] report also shows that in 2018, the top 1 percent would get 20.5 percent of the tax cuts; the top quintile would get 65.3 percent.
As we often note, since the wealthy pay most of the income taxes, they end up with most of the tax cuts in any across-the-board tax cut.
First of all, the fact that the top 1 percent gets more than 20 percent of the tax cuts, and that the top 20 percent gets almost two thirds of the cuts, doesn’t sound terribly “fair” to me, but it’s Glenn’s second sentence, “As we often note, since the wealthy pay most of the income taxes, they end up with most of the tax cuts in any across-the-board tax cut”, that’s the true whopper, since it’s only true if we cut the tax rate applicable at each bracket by the same amount, and there’s no reason whatsoever why tax cuts have to be applied in this manner. Either Glenn doesn’t really know what he’s talking about, which strikes me as the more likely case, or else he’s using “across the board” as what the lawyers call a “term of art”, said term of art left artfully undefined by Glenn as a snare for the unwary.
Let me deconstruct Glenn’s whopper in some detail. As most people understand it, an “across the board” tax cut is simply a tax cut that applies to everyone, and it’s easy to do that in a way where the lion’s share of the benefits don’t go to the rich. Suppose we simply reduce the tax on taxable income for the lowest bracket by 1 percentage point, affecting everyone from Rocket Man Jeff Bezos on down—which is, I think, what most people think of as an “across the board cut”. Then 50% will go to the bottom 50% and, yeah, 1% will go to the top 1%. Which means that Glenn’s statement about “across the board” tax cuts necessarily providing greater benefits to the wealthy qualifies not only as a “whopper” but a zombie whopper, since, as he tells us, he “often says it”—a whopping zombie whopper, in fact. Because here’s the thing: we could fashion an “across-the-board tax cut” of sorts that doesn’t benefit the rich at all! Simply give a boost to the level of earnings subject to earned income tax credit, and you get a tax cut that only benefits low-income people. Feel that nose a-growin’, Glenn? You should!
Oh, and what about another tax cut included in the 2017 package, one that wasn’t to the income tax, and thus isn’t included in Glenn’s data at all, the doubling of the estate tax exemption, allowing individuals to inherit up to $11.2 million tax free ($22.4 million for couples), which of course benefits the very rich exclusively. And, excusez-moi, why should there be any “exemption” for the estate tax in the first place? Inherited money is unearned money. Having wealthy relatives is simply a matter of luck, not hard work, or any other sort of “virtuous” behavior. It’s like winning the lottery. Lottery winnings are eminently taxable, so why not inheritances, huh, Glenn?
But there’s more. Much more. Because the real point of the 2017 tax cut was not to benefit individuals, but to benefit corporations, which is why the Republicans made the corporate tax cuts permanent rather than the cuts in taxes applying to, you know, people! Because when Republicans have to choose between helping corporations and, you know, people, it’s a goddamn no brainer!
And who, Mr. Green Eyeshade Pinocchio dispenser, benefited from those “glorious” corporate tax cuts? The rich, motherfucker, the rich!
Corporate profits increased massively during the Trump administration, thanks both to the economic recovery engineered by the Obama administration, which continued during Trump’s term, thanks in part to the “wild” deficit spending that suddenly became respectable once a white Republican replaced a black Democrat in the Oval Office (funny how those things work out), as well as the Trump tax cuts—which, on the other hand, did not benefit the larger economy at all!2 Corporate profits rose from around $1.6 trillion in 2016 to well over $1.9 trillion in 2018 and 2019, diving when the COVID hit but now pushing $2 trillion once more.
What did corporations do with all that cash? They bought back their own stock, driving up their stock prices—because with fewer shares, each one became worth more—stock that, of course, they owned, in spades. William Lazonick, Mustafa Erdem Sakinç, and Matt Hopkins, writing in the Harvard Business Review in 2020, fill us in on the gory details:
In 2018 alone, with corporate profits bolstered by the Tax Cuts and Jobs Act of 2017, companies in the S&P 500 Index did a combined $806 billion in buybacks, about $200 billion more than the previous record set in 2007. The $370 billion in repurchases which these companies did in the first half of 2019 is on pace for total annual buybacks that are second only to 2018.
Bill, Mustapha, and Matt think this is a bad idea, because it reduces the corporation’s supply of cash, which does come in handy when business gets bad, buy, hey, buybacks do help the bottom line, the bottom line of the big boys, that is, because when corporations buy back, say, $806 billion, of their stock, they inflate the value of the remaining shares by that same amount, shares that they, of course, own, literally, by the million. Dealer wins and winner deals!
Afterwords
If only Hakeem Jeffries had been “artful” enough to say that ‘83 percent of the permanent benefits went to the wealthiest 1 percent”. Then poor Glenn would have been forced to conclude that Hakeem’s analysis was “technically” correct—technically correct as in “correct”.
If you want more discussion of the true wickedness of the 2017 Rich Folks Relief Act, go here, for a fairly extended beatdown I administered to Ramesh Ponnuru for his phony on the one hand on the other take on the tax cuts,
1. Word can spell “hooey” but not “quoth”. What the fuck? Bill Gates, I would the gods had made you more poetical.
2. See Christian Weller’s article in Forbes, The 2017 Tax Cuts Didn't Work, The Data Prove It.
