Holdout Senator Bob Corker dropped his opposition to the tax bill after Republicans inserted a last-minute provision that would benefit him financially. We discuss Corker and the tax bill’s upward wealth transfer with economist Dean Baker
Story Transcript
AARON MATÉ: It’s The Real News, I’m Aaron Maté. Congressional Republicans are racing to approve their tax bill, a massive upward transfer of wealth. And they’ve just gotten closer after winning over hold-out Senator Bob Corker of Tennessee.
What happened? Well, this weekend the International Business Times reported that Corker, one of the Senate’s wealthiest members, stands to benefit from a provision that was added at the last minute. Speaking to ABC News, Senator John Cornyn of Texas did not deny that Corker may have been swayed.
JOHN CORNYN: Picking out one piece in a thousand page bill and saying, “Well, this is going to benefit somebody,” I just think that it takes the whole bill out of context.
SPEAKER: Well, accept that this provision wasn’t included in either the House or the Senate bill, apparently it was added at last minute. Why was that done, why was it necessary to include that provision?
JOHN CORNYN: Well, we were working very hard. it was a very intense process. As I said, the Democrats refused to participate and we’ve tried to do this, cobble together the votes we needed to get this bill passed, at the same time maintaining the integrity of the largest tax cuts we’re going to be seeing since 1986.
SPEAKER: So, is that how you got Senator Corker, with this provision?
JOHN CORNYN: Well, the particular provision you’re talking about, honestly is just one piece of a thousand page bill, which is going to grow the American economy.
AARON MATÉ: The House will vote on the measure on Tuesday and the Senate could soon follow.
Dean Baker is Co-President of the Center for Economic and Policy Research. Dean, let’s start with Corker. He denies that this change influenced his vote and in fact, on Sunday he wrote a letter to Senate leaders demanding that they explain the provision. But let’s talk about how this measure could benefit someone like him.
DEAN BAKER: Well, the measure provides for special treatment for income from real estate trust which Corker on his disclosure form indicates he has many millions of dollars, and he indicates he could get as much as $7 million a year in income from these trusts. And what that means for his taxes, instead of paying a 37% tax rate, that would be the new rate under the tax law, he’d pay just a 20% rate. So, he’s saving 17 percentage points on possibly as much as $7 millions in income. So, you do the arithmetic, that’s almost $1.2 million a year in savings.
Did that sway him? He insists he didn’t know. He didn’t know this provision was in there. No one could, I certainly can’t say whether that’s true or not but nonetheless, here you have a provision that means an awful lot of money to him and we see that he switched from being an opponent of the bill to being a supporter. People can draw their own conclusion. I don’t know. I don’t know his motivation.
AARON MATÉ: Is there some kind of sound fiscal argument for this provision?
DEAN BAKER: No, I mean this is clearly a special interest provision. They did something very similar with income from oil leasing, so that if you have land where people are drilling oil or for that matter gas, again you got a special provision here giving you a lower tax rate.
So, it looks to me, and again I wasn’t in on their discussions, it looks to me that you had lobbyists for these various interest groups saying, “Hey, we want, give us a tax break.”
Whether Corker was involved in that, I don’t know. But again, these are special interest tax breaks that, they make the industries happy and I guess you could say they’ll get more people to put money in real estate and oil. But this is not in general the way economists would look to design the tax code.
You don’t want to be picking winners and losers, that’s kind of a universal principle that you don’t want the tax code to say, “Okay, we give you special lower taxes because you’re in oil or real estate,” as opposed to being in software or pharmaceuticals, or whatever it might be.
AARON MATÉ: President Trump is among those people who’ve said that he’s taking a big hit on this tax bill, that it’s going to hurt his wallet and those of his rich friends. Is he right?
DEAN BAKER: It’s very hard to see how he’s taking a big hit here. I mean, he’s in real estate. He’s refused to disclose his taxes. He’s gone back on his campaign commitment where he said he’d disclose them when his audit was over. I assume at this point, his audit’s over. It’s been almost two years now, or more than two years.
But in any case, we don’t, the one return that was made public in 2005, he had somewhere in the order of 500 of these real estate trusts that would now be paying this lower 20% rate as opposed to the current 39.6% rate. If he’s paying higher taxes somewhere, it’s very hard to see where it would be and his spokespeople have refused to say.
Again, there should be a simple answer for it if it were true, instead they’ve been playing games, so kind of inclined to think it’s not true. He’s getting a huge tax cut.
AARON MATÉ: Let’s talk about healthcare. So, the measure includes a repeal of the health insurance mandate under Obamacare. You’ve also pointed out that it would hurt healthcare in another way, in terms of, by ballooning the deficit that will likely mean cuts to Medicaid.
DEAN BAKER: That’s right. So, as the law is written, if they follow the law this increases the deficit and under the 2011 Budget Act, there’s automatic cuts that go into effect, which will hit Medicare, Medicaid. Medicare would see a 4% cut, Medicaid I believe would be somewhat larger. And that would be done automatically unless congress takes action to prevent it.
Now some members, some Republicans have said, “Oh we won’t let that happen,” but I don’t know that we could take their assurances there. I mean, I guess we’ll see. But you vote on a measure that’s in front of you, so for anyone looking at this measure, it implies large cuts to Medicare, Medicaid and many other programs. Those may be reversed but that’s what the law says.
AARON MATÉ: And finally Dean, when we describe this measure as an upward transfer of wealth to the top, how does it compare in history to other initiatives of this sort? Other tax bills?
DEAN BAKER: Well, this is probably the worst. I’ve been in Washington for 25 years and of course, I remember the Reagan tax cuts even further back, back in the 80s. Those gave big tax breaks to those at the top, but they also gave substantial tax breaks to those at the middle and in some cases even the bottom.
This basically has nothing for the middle. To be clear, there will be some middle income people that will benefit, but a net, the middle gets nothing. Certainly if you look out to 2027 after some of the provisions expire. So, this is tax break that benefits almost exclusively those at the top end and that to my view makes it considerably more regressive, more upward redistributive, than either the tax cuts put in place under George W. Bush or the ones put in place under Ronald Reagan.
AARON MATÉ: Dean Baker, Co-Director of the Center for Economic and Policy Research. Thank you.
DEAN BAKER: Thanks for having me on.
AARON MATÉ: And thank you for joining us on The Real News.
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