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What Did They Say…Or Do?


October 29, 2018

Before Congress passed along party lines a $1.5 billion tax cut package at the end of last year, critics from various sectors made several not-so-optimistic predictions.
Among them were:

1.) The tax cuts would do little to foster job creation or beef up employee salaries, as companies would elect to use the savings from the tax cuts for company stock buybacks.

2.) The tax cuts would significantly add to the federal deficit, as the tax revenues would drop. Even if there is growth, analysts said it would not be enough to close the revenue chasm.

3.) The revenue shortfall would inevitably prompt some elected officials to call for (or to call again for) cutting down spending on popular federal safety net programs that help the most vulnerable and the poor in our society.

It appears all three predictions were pretty much spot on.

There’s little evidence that tax cuts themselves have produced salary increases, and companies that did decide to award their employees did so through one-time bonuses, which tend to be very fleeting when compared with structural raises. And, there are many stories of corporations using the tax cut proceeds to buy back stocks.

The federal deficit has indeed increased. On Monday, Oct. 15, it was revealed that the federal deficit – the difference between the amount of money spent and the amount of money actually taken in through taxes – had grown to $779 billion for the 2018 fiscal year.

Now that he deficit has grown, there are now – predictably – calls to rein in federal spending and to cut funding for the three major safety net programs. On Tuesday, Senate Majority Leader Mitch McConnell called for cutting spending to the big three entitlement programs (Social Security, Medicare, and Medicaid) to address the federal deficit.

“There’s been a bipartisan reluctance to tackle entitlement changes because the popularity of these programs. Hopefully, at some point, we’ll get serious about this,” he said in an interview with Bloomberg News on Oct. 16, 2018.

McConnell said he didn’t believe the tax cuts were to blame for the revenue shortfalls. However, the data show that corporate tax revenue slipped from $297 billion in fiscal year 2017 to $205 billion in fiscal year 2018. Corporations received the bulk of the benefits form the tax cut, as they saw their tax rates drop from a marginal rate of 35 percent to just 21 percent. Supporters say the rate cut was necessary to prevent corporations, and by extension jobs, from moving to other, more tax-friendly nations.

McConnell, like many Republicans, supported the tax package. Democrats in the Senate were unified in their opposition.

Shortly after McConnell made the remarks about cutting funding for the safety net programs, a couple of Democratic lawmakers responded by saying the dire predictions about the tax cuts were turning out to be precise.

“The truth comes out! This was their deceptive plan all along,” said Rep. Lois Frankel (D-Florida).
Rep. Tim Ryan (D-Ohio) said on social media, “When Republicans in Congress said their tax cuts to wealthy multinational corporations would pay for themselves, they lied. Now, they’re going to try to come for hardworking people to foot the bill by slashing Medicare, Medicaid, and Social Security. We can’t let them.”
The issue of curtailing spending on social programs is hardly novel. Over the years, various proposals have been made on how to make these safety net programs more solvent, modern, and sustainable.

During his presidency, George W. Bush proposed a plan that would enable workers to devote a portion of their Social Security taxes toward their own personal retirement accounts, an idea that some critics considered to be a partial privatization of a government program. The idea flopped.

However, Bush succeeded in reforming Medicare with the signing of the Medicare Prescription Drug Modernization Act in 2003, which enabled beneficiaries to have access to more affordable, and a larger selection of medications.

Other ideas on making these programs more sustainable have included: increasing the eligibility age of Social Security, given that people generally are living longer than in previous generations; means-testing; and making Medicaid a block grant program that would enable states to customize the program to meet the needs of their recipients.

While McConnell may be right that the safety net programs need to be changed, it’s also important to review prior decisions and votes that may have contributed to an already acute problem. History has shown that the tax cuts disproportionately help the well-to-do and multinational corporations, with a relatively nominal benefit for people in the middle class and the poor. Their problems only become more acute if the government programs for which they’ve paid their taxes toward become unstable and unreliable. Devoting precious tax revenues toward tax cuts at the expense of programs that help people in need appears to be cruel and irresponsible, if not immoral.

Sister Simone Campbell, who serves as executive director of the Catholic social justice lobbying group NETWORK, showed tremendous foresight and prescience on the day the tax cut bill was signed.
“We know what will happen now that this tax plan is law: The budget shortfall created by outrageous tax cuts for the wealthiest will pressure Republicans in Congress to, once again, balance the budget on the backs of people in poverty,” she said.
Government is where people and taxpayers turn toward when the private sector and other entities fall short in providing essential services. We encourage lawmakers of all stripes and ideologies to show compassion and sincerity when making consequential decisions about the three safety net programs.

These are not only two of Islamic Relief USA’s values. They also are pure American values.

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