Thu, Jan 04, 2018 - Page 9 News List

Trump’s tax legislation adds insult to injury: inequality will grow

By Joseph Stiglitz

Special tax breaks for the real-estate sector might help Trump and his son-in-law, Jared Kushner, but it does not make the US great or competitive, while limiting the deductibility of state income tax and property tax will almost surely reduce investment in education and infrastructure — again, not a sound strategy for increasing competitiveness.

Other new provisions will also hurt the US economy.

Because the fiscal deficit will increase — the only question is by how much, with my bet being that it will be far larger than current estimates of US$1 to US$1.5 trillion — the trade deficit will increase as well, regardless of whether Trump pursues more protectionist policies.

Lower exports and higher imports will further undermine US manufacturing.

Once again (as he has done with healthcare and the tax cuts), Trump is betraying his core supporters, but the Republican Party is cynical. Its leaders are stuffing themselves at the trough — Trump, Kushner and many others in his administration are among the biggest winners — thinking that this might be their last chance at such a feast, and no Republican believes the party can get away with it more firmly than Trump does.

That is why the legislation is structured to give individuals temporary tax cuts, with corporations getting a permanent reduction in their tax rate.

The Republicans seem confident that voters will not see beyond the next paycheck, but voters are not so easily manipulated — they have seen through the trick and are rightly convinced by the numerous studies, from sources in and out of government, showing that the lion’s share of the tax cut goes to corporations and the very rich.

Trump’s tax legislation also attests to many Republicans’ belief that US dollars are more important than voters. All that matters is pleasing their corporate sponsors, who will reward the party with contributions, which will be used to buy votes, thereby ensuring the perpetuation of a corporate-driven political agenda.

Let us hope that Americans really are smarter than the greedy corporate chief executives and their cynical Republican servants believe. With midterm congressional elections coming in November, they will have ample opportunity to prove it.

Joseph Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University and chief economist at the Roosevelt Institute.

Copyright: Project Syndicate 2018

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