A little over thirty years since the tax reform implemented by Republican President Reagan (1986) – though he was supported then by the Democrats almost without exception – Trump in his desire to emulate his predecessor, has launched one of the largest tax cuts in the history of the US.

Now, as then, the motive for this measure is the same. It is to drastically lower taxes, starting with those on businesses, to free capital and wealth from its fiscal burden, so that they can revive the economy in the form of greater investments and higher consumption. Of course, they say, we have to reward those who are richer, those who are at the top of the socio-economic system, because in this way the money, freed from taxes, can "trickle down", stimulating the economy and fattening the wallets of even those who struggle to make their pay stretch not just to the end of the month, but beyond its second week. In short, a great narrative, which, given the season, could be seen as a Dickensian Christmas story; except that the English writer was much better at entertaining us and his stories were openly fanciful. With Trump’s “reform”, however, we are in "fake news" territory (to use a contemporary cliché) or, more simply, a shameless lie of epochal dimensions, which the bourgeoisie has been pushing for at least thirty years, despite the fact that it has never actually happened.

Although the media have abundantly paraded the contents of the reform, it’s worth remembering some of those which have given the building speculator now domiciled in the White House so much pride.

First of all, it goes without saying, there is a net cut in the tax rate on companies, from 38% to 21%, which is slightly up on the 20% initially proposed, perhaps to meet some critical voices within the Republican Party itself . It must be said that, quite often, many companies already pay much lower rates even at 21% or benefit from tax breaks offered by individual states to attract businesses, but it is undoubtedly a great gift for the business world.

Second, there will be a lowering of taxes on individuals, which, unlike the first provision, will be temporary and will expire in 2025.

Third, there is a direct attack on the health reform of 2010, so-called Obamacare, which includes compulsory health insurance even for those who cannot afford it. This obligation is currently supported by Federal subsidies which will now be cut. The Trump administration thus plans to save 340 billion dollars in ten years, to be invested, it says, in national security or in infrastructure and, needless to say, in armaments (on this, there can be no doubt).

Fourth, but not least, there is a massive tax amnesty for profits made abroad so they can be repatriated in order to make America great again, to use presidential rhetoric. Incidentally, estimates of the foreign profits of large corporations speak of $24 trillion, which is some haul.

It is a fiscal manoeuvre made with great pomp, therefore, but whose effectiveness is subject to more than one legitimate doubt. Or rather, there can be no doubts about at least some of the measures, if you adopt the right perspective.

To begin with an obvious point, it is a giant gift to the upper social strata, to the rich and above all to the very rich, the notorious 1% (or 0.1%) of the population. The reduction of individual taxes in addition to being temporary [1], as has been said, will really make its effects felt only on those who have the highest incomes:

"In figures, compared to the 60 dollars for the poorest, 0.1% more will receive almost 200,000 dollars and over 50% of benefits will be the prerogative of 10% at the top.” [2]

In other words, not even half a cup of coffee a day, while the so-called middle class in the income range between 20,000 and 100,000 dollars [3], will get a few hundred dollars, which will rise or fall according to income. But in some states taxes could also go up, as the reform cancels the reduced allowances for local taxes, higher, coincidentally, in some states governed by Democrats, such as California and New York. It does not end there however, because the undermining of Obamacare (in itself already inadequate and partial) is expected now to involve, ten years since its launch, thirteen million people and will increase the cost of their health insurance, which has been moderated so far by the guarantee of state subsidies. Even those who have only a vague idea of ​​the expenses to be covered for medical services, considered here in Europe as routine, realise that this will probably result not only in a further impoverishment for millions of individuals, but in serious health problems, which could even lead to deaths. Moreover, since between cuts and discounts (the greatest being the tax on profits made abroad) the Federal deficit will probably exceed 1500 billion [4], then it will be necessary to cut back the little that remains of the welfare state (“social state”) and, in particular, its Medicaid and Medicare programmes. for the elderly and the poorest in our class.

So, the reform will be effective alright for some brazen performers called the bourgeoisie, but it is the "robbery of the century" for the proletariat.

There can be no doubt that the lowering of corporate tax rates will not only not revitalise the economy (the so-called “real economy”) of the States, but will only encourage the vicious circle in which the world capitalist system has been immersed for over forty years to carry on. The have been years of crisis that have ended in a paroxysm of speculation. For decades, so-called neo-liberalism, an ideology that in the years of the post-war economic boom (1950s and 1960s) was only found in the most reactionary sectors of the American bourgeoisie (like Goldwater, to name but one), maintained the fable that greater freedom for capital, less red tape in the management of business and labour (translation: limitless exploitation) was the sure way to encourage investment and thereby redistribute the greater wealth produced to everyone. Instead, it is exactly the opposite. Faced with the crisis of the accumulation cycle caused by the fall of the rate of profit, the “neo-liberal” cure has, of course, abundantly failed to re-establish an upswing in the economic cycle, even if it is filling the pockets of financial speculators with money. The point is that, although labour exploitation and insecurity have increased in every respect, the profits thus obtained are not invested in the production process, because the expected profit is not sufficiently “attractive” compared to the capital to be committed in the same process. [5] In other words, the extracted surplus value, although increasing, is not enough given the present organic composition of capital. It is a phenomenon that, albeit with different words and perspectives, can be detected in various "observers" of the bourgeois intelligentsia. One voice, among many others:

“Since the beginning of the 2000s, the money left in the coffers of US companies, even after paying taxes, has doubled: from 5 to 10 percent of GDP [...] And investments? Not a leaf has stirred.” [6]

In the United Kingdom, in the same period, where corporate taxation dropped from 30% to 19%, “the net investment rate”, the Financial Times notes, “has halved”. [7] The same goes for the German "locomotive", to say nothing of the Italian “stagecoach”. The mountain of money pocketed by companies increases financial parasitism and inflates the speculative bubbles that inevitably sooner or later break out. These have devastating repercussions on the real economy, from which every economic movement in the world originates. There would be no regressive tax reform (the less one has, the more one pays), and no cheap money (Quantitive Easing), if the real production of wealth was not affected by the cancer of the fall of the average rate of profit.

Even less true, if that’s possible, is the bad joke which says that "trickle down" will spread well-being and happiness uniformly throughout society. Since the post-war boom came to an end (early 70s), some time before Reagan, the advocate of "trickle down" theory, became President, poverty in the US stopped falling. On the contrary it has been accelerating in the opposite direction. Today, in the most powerful country in the world, there are (2014 data) twenty million people in extreme poverty, that is living (if we can call it that) on “an income less than half of the federal poverty line”, [8] but overall “the number of the poor, that is, of those who are struggling to meet the most basic needs, in the same year reached 105,303,000 souls”. [9] It is yet another confirmation that the Marxian critique of political economy was right on this as well, when it notes that the fundamental law of capitalist accumulation – when the latter has reached a certain level – brings about the progressive worsening of the conditions of existence for the working class, regardless of the degree of “well-being” achieved, and that crises are preceded by periods of high wages, despite the reformist fetishism of wage increases as a solution to crises. In the 1960s and 1970s salaries were on average – often significantly – higher than the current ones, the “welfare state" (i.e. indirect and deferred salary) much more robust, yet the crisis has returned to remind us, after all the illusions of the boom years, that capitalism cannot endlessly circumvent its insurmountable contradictions, which inevitably trigger social devastation (which nowadays are also environmental) and war.

We have to be aware of this but that is not enough, if that awareness does not take an organised form, nourished by the class and its struggles, of the need to do away with the bourgeoisie, and its world, once and for all.

CB

Notes

[1] Then it will increase, except for the richest.

[2] M. Valsania, The US tax authorities reward companies, Il Sole 24 hours, 21 December 2017.

[3] This differential is too large to be used analytically, as it puts large sections of the proletariat and the affluent petty bourgeoisie in the same boat.

[4] It is expected that the hole will be no less than $1400 billion, but if the economy does not start again with the stimulus desired by the charlatan supporters of trickle down, as is very likely (to say the least), it could exceed $1500 billion.

[5] In very simple terms, the expected profit is too small compared to the amount of money invested in machinery, raw materials, energy, miscellaneous expenses and, of course, the labour force.

[6] M. Ricci, The strabismus of the US tax reform ..., Republic online, December 24, 2017. See also V. Comitus, Waiting for the Minsky moment, Sbalanciamoci, 12 December 2017, M. Wolf, A tax reform tailored for the _plutocrats_, Il Sole 24 hours, 23 November 2017.

[7] M. Ricci, cit.

[8] Elisabetta Grande, Woe to the poor. The sad face of America, Edizioni Gruppo Abele, 2017, p. 13. An interesting book factually, but impregnated with an almost disconcerting reformism.

[9] E. Grande, cit., p. 25.

Monday, January 1, 2018

CWO Translation Tuesday January 2, 2018