The tax plan currently being pushed through Congress may not be the economic policy tax cut most are looking for. The more likely outcome will be a rise in equity prices by providing equity owners with more capital gains and dividends. Hardly a boon for ordinary America, instead we will continue to witness the precipitous to slide into third world standards of living. The GOP tax plan, not so much reform, may more than likely widen the divide between rich and poor. As the country desperately needs to deal with collapsing infrastructure and an onerous health care system, energy and finances will directed more toward the corporate and financial sectors, leaving little left for the work that needs to be done.
The current plan aims to reduce the corporate tax rate to 21%. What this means is that Global corporations registered in the US will be taxed at a lower income tax rate than a teacher making $50,000 per year–25% marginal tax rate on all income over $37,950.
Middle and upper middle class incomes will bear the burden of income taxation. Capital gains from their equity holdings are taxed at 15% when seasonal wait staff are taxed at 10%.
Whether cutting the corporate income tax rate to 21% will bring the offshored profits from Ireland and other places back to the US, is yet to be seen, but marginally unlikely.
Corporations will continue to invest overseas to take advantage of lower labor costs—most will opt to locate production where labor is cheapest. The goal is to ultimately deprive First World labor of good wages and work opportunities. If you are wondering how massive swaths of rural America has slid into Third World conditions, destruction of the domestic consumer market is a big part of it.
America sold out manufacturing and the worker in the 1990s, moving us towards the holy grail of a “service based economy”. After years of offshoring US manufacturing and professional tradable skills does investment in America make sense?
Again, the winner will be Wall Street which will calculate the lower tax rate into a higher equity price; this can be accomplished without offshored earnings coming back into the US. Equities owners will experience a boost in wealth, the majority of others may be left out in the cold.
Worries are that if larger deficits occur, cuts in social services will being offered up as a way to slow the rise of interest rates. The real reason the Fed wants to keep interest rates from rising is because derivatives will unwind, and the Fed will have to create trillions more in new dollars to prop up the economic foundation (this will be covered by the Fed purchasing the Treasuries, not by a rise in interest rates).
While the hope is that the financial sector will be supplying capital for investment in infrastructure and production, it instead will focus on converting discretionary income into interest and fees.
Cuts to Medicare and Medicaid are in our future. Deficit and high interest rates on mortgages, credit cards, and student loan debt will be used as an excuse to scale back Medicare, Medicaid, and Social Security.
As we have witnessed this month with Bears Ears and Grand Staircase-Escalante National Monuments, the environment and public lands will be sacrificed to the private profits of timber, mining, and energy companies.
America, and the rest of western Europe is collapsing as the workers are left weak and submissive as Northeast Progressive Bourgeoisie governments maintain the status quo of wage stagnation and marketplace destabilization.