Between anvil and hammer: The tax plan and government cuts

There is no doubt if it becomes law, Congress’s tax plan will be a trillion-dollar giveaway to the capitalist class it represents and will sharply widen inequality.

“Cutting taxes” has been a favorite propaganda piece of the capitalist politicians, who repeat endlessly that they want to lower taxes, with the false argument to working-class people that their incomes and lives will improve. But the slashing of tax rates for the corporations and wealthy will do just the opposite.

On the other end of the scale, the people whose incomes are less than $70,000 will be paying more taxes — for millions a lot more — over the next 10 years.

Tuition waivers to become taxable income

One example is a provision in the House bill that would make waived tuition taxable income. Most private educational institutions provide full or partial tuition waivers to employees, their spouses and their children who enroll at the institution.

Faculty and staff including security guards, janitors and administrative personnel stand to have their taxable income massively increased. An individual with a $50,000 salary at a private university who receives tuition remission benefits for a single child could see his or her taxable income double.

Deductions for interest on student loan debt would be eliminated, affecting twelve million indebted students and former students.

A more insidious effect on workers and the poor will be huge cuts in social services, and an increase in joblessness and poverty.

Already, spending for social programs has shrunk significantly since 2010 by the “bipartisan” Congress.

Now, with a federal deficit expected to balloon an additional $1.5 to $1.7 trillion over the 10 years of the proposed plan, programs will be gutted even more.

Two key factors will force the slashing of programs like Medicare, food stamps and other nutrition programs, college student aid, special education and rehabilitative services for children, environmental protection, medical supplementary insurance and much more.

Sequestration process

One is the sequestration process of the Budget Control Act of 2011, signed by President Obama. The BCA requires a mandatory cap on government spending each year until 2021.

To keep within that annual limit, the Office of Management and Budget decides what programs should be cut across the board for the next fiscal year. Then it is up to the president to sign an order for implementation.

For Fiscal Year 2018, the average tax cut proposed by OMB head Mick Mulvaney is 6.6 percent.

Mulvaney is a Tea Party adherent and Trump appointee who relishes his role as BCA hatchet man. Trump reportedly will also soon name him as acting head of the Consumer Financial Protection Bureau. This is the same consumer protection agency that Mulvaney tried to eliminate when he was a congressional representative from South Carolina.

In April before the current tax plan proposal, Mulvaney issued his recommendation of the budget cuts for fiscal year 2018.

Although there is allegedly a 50 percent equal share of sequester cuts for the military and non-military sectors, many exemptions guarantee that the Pentagon budget continues to skyrocket, especially costs related to wars already underway.


The second budget restriction is a process called “Pay-As-You-Go.” Both houses of Congress have their own PAYGO process, which requires any new legislation passed in a Congressional term to be deficit-neutral.

Therefore, for the current tax plan, the $1.5-$1.7 trillion added deficit must be offset by added budget cuts in the following ten years.

The PAYGO cuts are also determined solely by the OMB director.

According to an estimate from the Congressional Budget Office, issued Nov. 13, the tax plan passed by the House of Representatives would require $25 billion to be cut from Medicare in fiscal year 2018 if it becomes law, an average of $150 billion each of the following 10 years.

Regardless what happens to the tax plan debated today in Congress, there are already big budget cuts planned for 2018 and beyond, because of the BCA.

President Trump signed an Executive Order on Oct. 1 to enforce the spending cuts for fiscal year 2018 determined by the OMB last April. This is even before considering the program slashing if any version of the tax plan takes effect.

Other programs to be cut in the April OMB report are $66 million from Direct Student Loan Program (created by an increase in student loan fees) and $228 million from the Office of Special Education and Rehabilitative Services.

Cutting vital food, health and education programs results in a loss of “social wages,” which particularly impacts low-income people, who today make up more than half of the population.

What won’t get cut: U.S. wars

What won’t get cut and instead is steadily increasing, is Pentagon funding of Overseas Contingency Operations (OCO), for the many wars in which the U.S. is presently engaged.

As pro-military analyst Todd Harrison wrote for the right-wing Center for Strategic and International Studies, “Technically, the law says the budget cap is automatically increased by the amount of war-related funding Congress enacts, which means that OCO funding is effectively uncapped.”

In addition, Trump has proposed a $50+ billion increase in the military budget.

Taken together, the proposed Pentagon budget, tax cuts and decimating of environmental regulations represent a massive transfer of wealth to the big banks, oil companies, military-industrial corporations and the super-rich.

This can only mean devastation for the vast majority of people.

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