Financial capital is people, my friend.
By Zach Carter
The United States has a problem. Over the past decade, most of its families have been spinning their wheels. The median household income, adjusted for inflation, has grown by just 1.5 percent ? $839 ? since the beginning of the Great Recession.
Over the same period, the total annual economic output of the United States has grown at 10 times that rate. The gains are even more impressive on the stock market, which has climbed about 40 percent (also adjusted for inflation). This is not due to the unique savvy of our investors. Business is just good. Corporate profits are booming, and the value of financial assets tied to those profits is booming along with them.
The experience of the past decade shows very clearly that trying to assuage the economic strains on the middle and working classes by pumping up Wall Street only helps people who already own a lot of financial capital. And people who already own a lot of financial capital don’t need help. Half of all gains from the sale of stocks and bonds accrue to households that make over $1 million a year. Less than one-fourth of American households own more than $25,000 in stock. And the 400 wealthiest households take about three-fourths of their very substantial annual incomes from financial investments.
So the tax legislation passed by House Republicans last week shouldn’t really be understood as economic policymaking in any traditional sense. It’s not about stimulating growth or investment or improving incentives. It’s class war. Republicans are assisting the efforts of a very small, very rich faction to take an ever-growing share of the nation’s wealth from the rest of us.
Republicans dialed up about $6 trillion worth of tax cuts. Senate rules require them to offset $4.5 trillion of that with new revenues, or face a Democratic filibuster that would kill the legislation. The tax cuts for the capital class blew a huge hole in their budget. The detritus they threw into that $6 trillion hole is, essentially, you.
A $1.5 trillion corporate tax cut would go straight to people who own stock in corporations. Another $696 billion would go toward repealing the alternative minimum tax ? a provision that is supposed to prevent the super-rich from paying no taxes at all. Another $596 billion tax cut would assist so-called “pass-through” entities ? hedge funds, investment vehicles, law firms and other things rich people use. Best of all is the repeal of the estate tax, which would enable millionaire and billionaire families to pass their fortunes on from generation to generation without ever having to pay taxes on financial assets.
Even the people who would benefit from these windfalls do not generally think it would encourage them to do anything productive. On Wednesday, Wall Street Journal Editor-in-Chief Gerry Baker asked a crowd of CEOs whether they would increase their investments in new equipment or technology if the bill passed. Only a few raised their hands. “Why aren’t the other hands up?” asked an embarrassed Gary Cohn, President Donald Trump’s chief economic adviser.
To realize these wonders for the 1 percent, Republicans have assembled a potpourri of problems for everyone else. The $47.5 billion they would strip from people paying student debt or attending graduate school would all but end post-collegiate education for anyone without a trust fund. By eliminating the deduction for state and local government taxes, Republicans would bleed municipalities and force cutbacks in public education and infrastructure. Local governments would get blasted again by the elimination of a $17.3 billion program to help refinance debt at lower interest rates, and the bill would strike a further $38.9 billion in financing to build hospitals, affordable housing and university buildings. They’d end a $54 billion tax credit for research into rare diseases. And a $300 million credit for businesses that comply with the Americans with Disabilities Act. And the deduction for personal medical expenses. And credits for renewable energy.