Sen. Bob Casey (D-Pa.) said he plans to introduce an amendment that would peg corporate tax cuts to workers’ pay, but doesn’t expect it to get traction as Senate Republicans push forward with a federal tax overhaul.
Casey pitched a measure to make corporate tax cuts conditional on nonexecutive payroll gains meeting or exceeding executive pay increases, stock buybacks, and dividends — expressing skepticism that the re-introduction of “trickle-down” economics by the GOP leadership would see results.
“It’s disconcerting when you have permanent cuts for corporations, but the corporations have no track record that they will use that cash to benefit their workers,” Casey said on a call with The Sentinel. “I’m sure I’ll offer it and every Democrat will vote or it, but I doubt any Republicans will.”
The Senate was voting on amendments to the tax proposal Thursday afternoon, with final vote expected late Thursday or Friday.
Casey’s counterpart, Sen. Pat Toomey (R-Pa.) has been closely involved in the drafting of the GOP’s tax plan and has been a staunch supporter of its basic principles.
But other Republicans have sought to introduce so-called “trigger” clauses to the bill that would raise taxes back up if the promised growth doesn’t materialize, echoing the concerns of Democrats like Casey.
Toomey’s office pointed to an interview with Fox Business on Wednesday, in which Toomey said “I don’t like the idea of putting in triggers based on revenue, but I like the idea of passing legislation.”
“I certainly hope and believe we’ll be exceeding those revenue levels, in which case no change happens,” Toomey said, referring to the trigger clause proposed by Sen. Bob Corker (R-Tenn.). “If, however, the revenue is below the target then we will have to implement at that point, seven years from now, some kind of tax increase that will generate a certain amount of revenue over the next 10 years.”
The odds of having a trigger or reversion clause included in the bill, either in the Senate or in House reconciliation, were unclear as of Thursday evening.
“The trigger talk has been just talk,” Casey said, criticizing the rushed nature of the bill’s passage. “We might have an hour or two to analyze something that substantive, when in reality we should have an entire hearing process just on that one question of a trigger clause.”
The rift on the issue between Pennsylvania’s senators underpins a clear ideological department between liberals and conservatives on the issue of tax cuts.
While households of all income levels will see some savings under the current GOP bill, the bulk of the tax relief, in dollar value, goes to higher-income individuals and corporations.
American households making under $100,000 — 76.5 percent of the population — will see a net reduction of $57.6 billion in individual taxes in 2019 under the GOP framework, according to the most recent Congressional Budget Office estimates. The 23.5 percent of the population that makes over six figures, however, will see a net reduction of $181 billion in the first year of the Republican proposal.
Cutting the corporate rate from 35 to 20 percent would bring the total cut to nearly $1.5 trillion over 10 years, according to the Joint Committee on Taxation. That number also includes more favorable deductions for capital investment, but also the elimination of certain deductions such as state and local taxes.
For conservatives, prioritizing corporate cuts is necessary to promote new investment and, subsequently, higher wages and more jobs, the bedrock principle of what was called “trickle-down” economics in the Reagan years.
“If I were king, I would lower marginal rates more for everybody,” Toomey said on Fox News when asked about individual rates. “But we had limit of how much revenue we could forgo in this exercise, so we made the best decisions we could to be fair to working families and generate economic growth."
For Democrats, however, the idea that corporate cuts are more pro-growth than working-class individual cuts is anathema.
“This is a giveaway to the super-rich and corporations, and won’t benefit the middle class like it could if we worked together and made the middle-class tax cut more substantive and comprehensive,” Casey said. “The reality is big corporations give the bulk of tax benefits to their executives or their shareholders.”
A study by the Tax Policy Center earlier this month concluded that 90 percent of the benefits of the GOP tax cuts would go to the top fifth of American households, using a historical model in which an average of 80 percent of tax savings have gone toward dividends and bonuses, and 20 percent go toward new jobs and capital.
Conservative commentators have disputed the TPC report.
“When business puts capital to work, workers make more money, and that’s going to happen under our bill,” Toomey said in a Senate floor speech Thursday. “A large number of economists have acknowledged that it’s going to mean more business investment, more new businesses being launched, business moving back from overseas, and expansion of existing business.”
But for every economist who supports the theory, there is another who doesn’t. A University of Chicago poll found only one out of 38 prominent economics professors who agreed that national GDP would be “substantially higher” under the Republican tax proposal versus the current framework.
Bruce Bartlett, a policy adviser for Ronald Reagan, wrote a Washington Post editorial in September that “there is no evidence showing a boost in growth” from the 1986 tax cuts that he helped to design.
Further, Congress’ own tax study from the JCT released Thursday afternoon found that, even including an estimated 0.8 percentage point increase in GDP growth due to tax cuts, the Republican tax plan would still add $1 trillion to the national debt over 10 years.
For deficit hawks, this threatens to become a replay of the Reagan era. The 1986 tax cuts ballooned the nation’s debt-to-GDP ratio from 43.7 percent at the end of 1985 to 63.4 percent at the beginning of 1993, when Bill Clinton raised taxes, according to St. Louis Federal Reserve data.