Tax bills give huge benefits to the super-rich

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Police corruption is rife from Baltimore to Philadelphia SOCIALIST ACTION DECEMBER 2017 3 Massive tax cuts for the wealthy are moving for­ ward in Congress, with the Senate passing its own version on Dec. 1. All that is left now is for the House and Senate to combine their two very similar bills and smooth out the minor differences. Once that is done, the plan will gift hundreds of billions more dol­ lars to the wealthy every year.

The tax plan is designed to further enrich billion­ aires, Wall Street, corporate executives, stock own­ ers, and even mere millionaires, while taking money away from the poor and working class, immigrants, and Medicare. Taxes on the wealthy and corporations are slashed across the board, while tax deductions used by working people will be eliminated or phased out.

In fact, the official analysis of the Senate bill shows that, by 2027, it will raise taxes for everyone making under $75,000. That is because many deductions are eliminated right away and others eventually expire.

For example, the bill would slightly raise the child tax credit for a few years, before eliminating it altogether.

Another change would make all immigrants ineligi­ ble for the child tax credit.

The elimination of the personal exemption will lead to many families paying higher taxes right away, as an increase in the standard deduction won’t make up the difference. Taxes for everyone else will go up in 2025, when the increased standard deduction also expires.

Many other deductions, such as for medical expenses or student loan debt, will likely be eliminated in the final bill as well.

The tax plan uses many accounting gimmicks to mask the true costs of the tax cuts for the wealthy— for example, setting some tax breaks for the rich to expire, such as the estate tax cut, which would very likely be renewed. But even after all of the measures to make it look like the tax cut won’t cost as much, there is one group whose tax cuts only go up and up and up: the 0.1 percent super-rich.

Those costs will be paid for by cutting programs and deductions that benefit poor and working-class people. For example, the projected increase in gov­ ernment deficits of $1.5 trillion over 10 years will au­ tomatically trigger major annual cuts to Medicare to pay for it. That means that next year, $25 billion will be taken from Medicare and given to the ruling class.

The elderly aren’t the only ones whose health care will be cut by the law in order to give more money to the rich. The Senate tax bill makes changes to Obam­ acare that are intended to keep 13 million people from signing up for subsidized health insurance or Medicaid—increasing the number of Americans without health insurance to 41 million, and paying for $338 billion worth of tax cuts for the rich.

The bill also continues the capitalist attack on the environment by opening the Arctic National Wildlife Refuge in Alaska for oil and gas drilling, a longtime goal of oil companies.

Some of the tax plan’s biggest giveaways to the rich are in corporate taxes. The corporate tax rate will be cut almost in half, from 35 percent to 20 percent, though what companies actually pay is often much less than that. They have endless loopholes, tax de­ ductions, and ways of reclassifying or hiding their profits in order to pay the lowest taxes possible.

A recent study of Fortune 500 companies’ taxes showed that one in 10 paid “less than nothing” in in­ come tax over a five-year period, actually receiving tax credits, despite reporting profits into the tens of billions of dollars. The new House and Senate bills scrupulously maintain these loopholes and opportu­ nities to cook the books—and they create new ones.

In mid-November, federal agents arrested a Philadelphia police officer, Eric Snell, for allegedly acting as middleman for a drug ring run by a Baltimore police firearms task force. Eight Baltimore cops stand accused of framing and extorting suspects, overtime fraud, and stealing money, cocaine, and heroin. The drugs were then resold on the streets of Philadelphia.

Baltimore prosecutors have been forced to drop charges against more than 100 de­ fendants who were accused by these cor­ rupt cops.

In Philadelphia, police corruption is noth­ ing new. In 1995, scandal rocked the city when 39th District cops were accused of framing suspects, violating civil rights, violence, and theft of money. In all, sev­ en Philly cops were convicted. As many as 300 cases were overturned and about 100 people released from prison for being framed by corrupt cops.

A key witness for the government against the 39th District cops was long-time police informant Pamela Jenkins. She had previ­ ously testified against Mumia Abu-Jamal in his frame-up trial for killing Officer Daniel Faulkner but later recanted her testimony. The 39th District scandal wasn’t the end of police malfeasance in Philadelphia. In Corporations also won’t owe taxes on overseas profits anymore. If any American companies decide they’d like to repatriate some of the $2.6 trillion in untaxed profits that they are holding overseas, the bill will allow them to do so at a considerably reduced tax rate. Otherwise, they can have their accountants move their windfall profits to a country with very low corporate taxes—or none at all—and very friendly policies.

Apple, for example, kept their overseas profits in Ireland, where in 2014 they paid a tax rate of 0.005%. After the European Union (EU) found this basically tax-free arrangement to be illegal and ordered Apple to pay $14.5 billion in back taxes, Ireland appealed, saying Apple shouldn’t have to pay anything. The re­ cently released Paradise Papers show that the com­ pany has since decided to move its $252 billion in overseas profits to the nearby island of Jersey, where they pay no taxes and EU tax laws don’t apply.

The next big gift in the House and Senate tax bills go to the owners of companies whose income can be reclassified as personal income. These are the so-called “S corporations,” whose income is not taxed as corpo­ rate income but instead “passed through” to share­ holders and counted as personal income. They are often referred to as “small businesses,” but in reality many of them are holding companies, hedge funds, and real estate companies. More than two-thirds of “pass-through” income goes to the top 1 percent, ac­ cording to a 2015 study by economists at the Trea­ sury Department and two major universities, not to “Mom and Pop” stores.

However, the “small business” label is used to justify low taxes on these companies. Under the new plan, income from this type of business would receive a huge tax cut. In the House version, it would have a maximum tax rate of 25 percent in the House bill— way below the current top rate, or 39.6 percent. The Senate plan has a tax deduction for the first 23 per­ cent of pass-though income. Either way, the tax cut is enormous.

One person who would benefit is Donald Trump himself, who has more than 500 pass-though corpo­ rations. The Trump Organization, with $9.5 billion in reported revenue in 2016, qualifies as a pass-through entity. On Trump’s 2005 tax return—the most recent one available—he reported $109 million of this kind of income. Both versions of the new plan would save him tens of millions of dollars in taxes, on this one portion of his income alone.

May 2015, six Philly narcotics officers were found not guilty in a federal trial.

They had been accused of faking and plant­ ing evidence, theft of drugs and money and of framing suspects. More than 1000 con­ victions have been thrown out in the wake of the drug squad case, with more than 200 remaining to be reviewed. This case will cost city taxpayers an estimated $24 mil­ lion in lawsuits by the victims of the cops.

But corruption continues. In April 2015, a 19-year veteran of the force, Christopher Hulmes, was arrested for perjury and mak­ ing false reports. Former DA Seth Williams (who himself pled guilty to corruption and cnn.com (Above) House Speaker Paul Ryan plugs tax bill.

This is also one of the biggest loopholes in the new tax plan. Simple accounting maneuvers will allow the wealthy to switch their income from regular income to “pass-though” business income and save billions in taxes. This loophole is not accidental or due to “haste,” as The New York Times described it. It is en­ tirely intentional and just another way that this bill will cut taxes for the rich in ways that go far beyond the officially projected amounts.

In addition to what the bourgeoisie stands to gain from the business tax cuts, they will also get large cuts on their personal income. The House and Sen­ ate bills have different ways of giving the rich these tax cuts, but both bills mainly benefit people making more than $500,000—right about where the 1 per­ cent starts. And, of course, the higher you go, the big­ ger your tax cut gets. The 0.1 percent and up are the real beneficiaries.

The estate tax is slashed and possibly repealed, de­ pending on how the House and Senate combine their versions. Either way, the amount of tax-exempt in­ heritance will immediately double from $5 million to $10 million per person, an amount that would only affect 0.1 percent of estates. Although, as Gary Cohn, Trump’s chief economic advisor and former president of Goldman Sachs, said earlier this year, “only morons pay the estate tax,” because there are so many way of getting around it.

Meanwhile, the bills raise taxes on the poor and the working class. Both bills eliminate all kinds of tax de­ ductions used by working people, in order to offset some of the cost of the huge tax cuts for the extremely rich.

The bourgeoisie tells us that all of this will result in a better economy for everyone, with more jobs and higher wages. They’re giving themselves huge tax cuts for our benefit, they say. At an event hosted by The Wall Street Journal with Gary Cohn, Trump’s economic advisor, a journalist asked a roomful of CEOs how many would use the money from these tax cuts for hiring and expanding their businesses, rather than lining their pockets. Only a few raised their hands. “Why aren’t the other hands up?” Cohn demanded. They forgot to lie.

American companies are already getting record profits, while wages are at a historic low and falling. Income inequality has never been higher, but every­ (continued on page 5, in “U. Wisconsin-Superior students protest program cuts”)

bribery charges in 2017) let Hulmes get off with pre-trial intervention and the promise not to return to law enforcement. The DA’s office stated that more than 500 cases in­ volving Hulmes were under review.

Police corruption, civil rights violations, and violence against communities are all linked. We can’t rely on liberal politicians for solutions. Police and the district attor­ ney’s office are part of the repressive arm of the state and serve to feed the regime of mass incarceration. Socialists call for police abolition and their replacement by democratic, community-based solutions.

Policing should be accountable to demo­ cratically elected community boards and not overseen by the district attorneys. n

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Socialist Action (Left) Delegation of Hilton workers states demands to hotel managers at start of union drive, Nov. 13.

The starting wage for non-union Hilton housekeep­ ers in Stamford is roughly $10 per hour. In Stamford, Hilton housekeepers must often clean over 30 rooms in an eight-hour shift.

Every day, hotel housekeepers across the country are punching in to work with little sleep after working two or three jobs. Most are immigrant workers and women. The racial and gender aspect of this struggle is important because there is a serious wage gap for women. The wage gap is even larger for women of col­ or. Many are also quickly moving toward retirement age with no real safety net.

Some older housekeepers walk with a permanent limp from years of hard physical labor. If they do buy in to the company’s health-care plan, they must pay extremely high costs. Some workers talk about bring­ ing home paychecks with little money, no money, or even owing money to the company!

Rosemene, a housekeeper from Haiti, said during the worker delegation to the general manager on Monday, Nov. 13, “I have no time for my kids, no time for my family, no time for myself. I have to work three jobs.”

Housekeepers are the backbone of the hospitality industry, yet they are often treated with disrespect and poor wages. A housekeeper who cleans 30 rooms a day, five days a week for a year, when the hotel sells the room on average for $127.69 per night (the U.S. average; Stamford is likely a bit higher) brings in nearly $1 million for the hotel owners in that year. The