Taxes: Ending the Race to the Bottom

Two weeks ago I composed a seriously considered, and yet a mockery, of the Republican's common call for tax returns to fit on a postcard. As expected, the Republican plan fails this criteria, as it fails to cut middle class taxes. A quick outline of what their tax plan does. It...

Weakens the Affordable Care Act by eliminating the individual mandate. The CBO claims this will increase health insurance prices by ten percent as healthier, young citizens opt out, leaving older citizens paying more for healthcare.

Repeals the Estate Tax and Alternative Minimum Tax (the only reason the President, a billionaire, paid taxes in 2005) which only effect the very highest earners.

Opens up Alaska's Arctic National Wildlife Refuge for drilling.

Reduces corporate taxes from 35% to 20%, even though international companies are not contributing a dime, like General Electric, Apple, and Priceline.com.

Increases the National Debt by 1.5 trillion over ten years (Undoubtedly this will be have to be paid for somehow. After passing this gift to corporations, Republicans will immediately remember the deficit, clamor to cut social services, and refuse to extend crucial programs like Children’s Health Insurance Program).
A majority of middle class Americans will get 1.25% back on the tax return in 2017, but a third will see increased taxes. Unlike the corporate tax reduction, which is permanent, these tax cuts will be phased out in 2025. Meanwhile, the top five percent of earners will receive 3% back, and these tax cuts will remain past 2025.

And why? Why deliver a massive cut to international companies already dedicated to avoiding taxes, to give a small tax cut to the middle class which will then be clawed back ten years later, to offer a tax cut to millionaires and billionaires? Supposedly, so the United States can compete internationally. But corporations based in the United States are accumulating record setting profits!
Yet it's true, many multinational corporations are trying to hide behind loophole tax laws in various countries. An example of the absurdity of the situation: The European Union is suing the member state of Ireland, to force the Irish government to collect taxes from Apple. Apple has harbored in Ireland to avoid taxes incurred globally, and Ireland is refusing to recover these taxes, but the EU has ruled Ireland's agreement with Apple is illegal state aid.

The Republican tax reform is part of the global race to the bottom for multinational corporations, funded by a deficit which will be repaid by devastating social services and the most desperate who rely on them. Its purpose isn't to make American based corporations more competitive, but to provide the biggest return to millionaire and billionaire shareholders.

But this race to the bottom isn't only occurring internationally. Its also happening between those laboratories of democracy, the states.

Take for instance, the Carrier deal which the President and Vice President brokered the air conditioning company in the state, and retain employment. Though Carrier agreed to keep two thirds of the 1,500 jobs it intended to move overseas, it cost the state of Indiana seven million dollars in incentives. In the fight to house General Electric (a criminally negligent company when concerning the environmental damage it has wrecked), Massachusetts handed over a massive amount in incentives. The same could be said for the Commonwealth's attempt to lure Amazon's second hub, which includes Worcester's five hundred million tax incentives.

It's a bad deal. But there is a solution, and it comes from the Constitution.

Article I, Section 8, Clause 3, says:

The Congress shall have Power …. To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.

That's right, the Commerce Clause.

Here's the theory. The Commerce clause has a very broad definition. It was the outgrowth of a particular failure of the Articles of Confederation. Prior to the Constitution, States competed by implementing tariffs against each other. Each state did everything within its power to gain an advantage over the other states, even if it meant paralyzing the Federal Government. With the Constitution, the National Government could overrule this petty and unproductive behavior.

As Justice John Stevens wrote in Gonzales v. Raich (a case which said states could not leagalize medical marijana over the objection of the National Government):

The Commerce Clause emerged as the Framers' response to the central problem giving rise to the Constitution itself: the absence of any federal commerce power under the Articles of Confederation. For the first century of our history, the primary use of the Clause was to preclude the kind of discriminatory state legislation that had once been permissible. Then, in response to rapid industrial development and an increasingly interdependent national economy, Congress “ushered in a new era of federal regulation under the commerce power,” beginning with the enactment of the Interstate Commerce Act in 1887 and the Sherman Antitrust Act in 1890.

Stevens' point? To demonstrate the expansive historical power of the Commerce Clause, and its ability to supply essential Constitutionality to issues such as medical marijuana, environmental regulation, and the individual mandate. Its original purpose was to prevent discriminatory state laws, and has been used to bust trusts and protect workers.

A well intentioned White House would employ the Commerce Clause to curtail this race to the bottom, which is a undeserved gift to corporations at a cost to citizens. It would challenge these tax incentives to prevent undue competition between the states. Competition which brings jobs, but burdens the citizens of the states, allowing incredibly wealthy corporations to avoid paying their share of the costs of a civilized society.

And (one can dream), if the White House was really worried about global competition, as it claims it is, would engage in diplomacy, (using the State Department it's shredding) to discuss clamping down on tax havens (both personal and corporate), and loop holes which prevent the wealthiest from paying to live in a society where the poorest respect their wealth.

But the current Administration, instead of crafting a tax reform which benefits the middle class, is eager to hand over more of the nation's wealth to themselves

The CBO has scored the Republican Tax bill: 1.4 trillion added to National Debt over ten years, reduces the number of citizens with health insurance, and large tax cut for the wealth with only minimal effect for the middle class.

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