An unpopular business tax cut that doesn’t bring relief to the “backbone” of America

By: 
Ethan Stoetzer

Newsplaining Column: What do Sarah Palin, Representative Marlin Stutzman (R-Indiana, Third District), former President George W. Bush, Representative Bobby Jindal (R-Louisiana, First District), Representative Sam Graves (R-Missouri, Sixth District), Senator Joni Ernst (R-Iowa) — to name a few — all have in common?
They’re all on record stating small businesses are the backbone of the American Economy.
And to the utmost extent, they’re right. Odds are that if you do not live in a densely populated area of 10,000 or more people, or prefer arguably better made products and delivered services, the likelihood of you visiting a big box store like a Walmart, Target, brand department stores, Home Depot, etc., is not high, considering that the drive to one could constitute making it a day trip or more.
The truth is that most Americans have contact with small, independent business on a daily basis, making them quite literally, “the backbone of the American economy.” And the reality of the 2017 economy’s reliance on the internet and convenience, these small business owners aren’t making large sums of money like their large, big box competitors.
So why then is the GOP tax reform bill leaving small business owners behind in favor of larger corporations?
The GOP House of Representatives released their first attempt at a tax reform package two weeks ago (The Tax Cuts and Jobs Act), centered on the fact that the code would be simpler (file on a post card), and a break for middle class Americans.
After many think tanks and non-partisan economists had their crack at examining the bill, the only thing that the bill currently does is simplify the tax code, at the expense of middle class Americans.
According to the corrected Tax Policy Center analysis on the bill, in 2018, the bill would increase after-tax income at an average of 1.6 percent, equivalent to “approximately $1,200.”
To break it down further, in 2018, those making $25,000 or less would see a cut of 0.4 percent. Those making between $48,000 and $86,000 would receive a tax cut of approximately $800.
Those who make more then $730,000 would receive “nearly 21 percent of the total tax cut: an average cut of about $37,000, or 2.5 percent of after-tax income.”
By 2027, the overall average tax cut would be less than in 2018, reducing taxes on average by $700, and would result in approximately 59 percent of Americans seeing their taxes increase by $2,100. Those making $50,000 or less would see little change in their taxes. Taxpayers in the top one percent would receive nearly 50 percent of the total benefit.
Now, I’m not a small business owner, but I frequent them and would venture a guess that after paying inventory costs, operational costs, state and sales taxes, that most are not bringing home even close to $730,000 in annual income, meaning that their taxes on their profits from businesses hurts them, and benefits those who own big box stores.
Now, that’s just on personal taxes when it comes to small business owners. When it comes to actually taxing the businesses themselves, the bill doesn’t do anything at all.
Most small businesses are set up as “pass-through entities,” meaning that these businesses bypass the current corporate tax structure, which would normally require them to first pay a corporate tax, then an individual tax rate (totaling on average 32 percent, according to Vox.com); a pass-through entity designation only makes you pay the individual tax rate (an average rate of 19 percent, but is listed as 25 percent, according to Vox.com).
Normally, this could be seen as a big bonus for small businesses, considering the corporate tax rate is over 30 percent currently, however, some corporations — like the Trump Corporation — structure themselves like pass-through entities, completely avoiding the corporate tax.
While the bill assures that small business would pay no more than 25 percent, most small businesses already pay 25 percent based on annual profits, while large organizations like the Trump Organization, would see immense tax breaks.
All this bill ends up doing is giving the rich a tax break at the expense of lower income, to middle class citizens (whom, according to a legitimate pamphlet distributed by the GOP, are classified as making $450,000, per year). Not to mention the fact that the tax cuts, coupled with the elimination of certain deductions, still leaves a nearly $1.7 trillion dollar hole in the national debt, which the GOP promises will be offset by its estimated 3.3 percent growth in the economy.
But there is no proof that the economy will grow 3.3 percent. Not even the conservative think tank The Tax Foundation anticipates a 3.3 percent growth in the economy. Former President George W. Bush argued that the economy would grow when he signed two rounds of tax cuts to offset the decrease, but that growth never materialized. Former President Ronald Reagan assured the nation that the economy would grow to offset his tax cuts, but there was no such proof. There is no statistical data that shows that cutting taxes can increase the economy enough to offset them.
So why are we being told it will? Why is the “backbone” of the American economy being asked to finance its competitors?
Because, at least according to New York GOP Senator Chris Collins, “[his] donors are basically saying ‘get it done or don’t ever call me again.’”
According to a Pew Research poll, just 24 percent of Americans want a corporate tax cut… 24 percent.
The “backbone” of the economy? It seems like that, if by backbone, you mean, the literal support of America’s tax structure.

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