Economy

‘Moderate’ GOP Candidate Releases Extreme Plan To Gut Poverty Programs And Give Handouts To The Rich

CREDIT: AP Photo/Jose Luis Magana

Republican presidential candidate John Kasich

On Thursday morning, Republican presidential candidate and Ohio Governor John Kasich will release a tax and spending plan that would give big boosts to the rich and the wealthy with severe cuts for everyone else.

While his plan includes a 10 percent increase in the Earned Income Tax Credit, which mostly benefits low-income Americans, most of his tax cuts would benefit the richest, according to a preview obtained by the Associated Press.

He would lower the top income tax rate paid by the richest from its current level of 39.6 percent to 28 percent, reducing it by nearly a third. While the campaign hasn’t released full details, nor has an analysis been done on his plan, a proposal from fellow Republican presidential candidate Jeb Bush that would lower the top rate to the same level found that it would increase the incomes of the 1 percent by more than 11 percent.

Kasich is also claiming that his tax cuts will spark economic growth, yet there’s very little evidence that lower income taxes spur growth and the economic has expanded faster under higher rates.

He would eliminate the estate tax, which is currently only paid by the richest 0.2 percent of Americans. While that may sound small, it is a significant and progressive source of revenue, projected to bring in $246 billion over the next decade.

He would also lower the tax rate paid on money made through investments, rather than through wages at work, from its already lower level of 23.8 to 15 percent. The benefit of that reduced rate flows almost entirely to the richest Americans, as 70 percent of the money saved goes to the top 1 percent, while just 7 percent goes to everyone in the bottom 80 percent.

Corporations would also benefit from his plan, as their on-paper top tax rate would be reduced from 35 to 25 percent. As with income taxes, there is no evidence that high corporate tax rates hurt economic growth, and those that pay the highest effective rates actually create more jobs than those who find ways to lower their bills.

“If you are a person that thinks you ought to pound the rich into submission, I guess you won’t like the plan,” he told the AP.

But the plan doesn’t just give tax breaks to the well off, similar to those released by fellow contenders Jeb Bush, Donald Trump, and Bobby Jindal. It also seeks to balance the federal budget within eight years. A balanced budget requirement necessitates either large spending cuts or tax hikes in times of increased government outlays, such as in a recession when more people rely on the safety net and tax receipts decline as people lose jobs or decrease spending. It would also hobble the government’s ability to respond quickly to things like bank crises or runs, necessitate a cut in Social Security benefits given the way the program is structured, and affect military retirement and civil service retirement programs.

Kasich plans in part to balance the budget through deep cuts to domestic spending, even as he proposes a big boost to military spending. The reductions in spending would be at least partially achieved through an eight-year freeze on all non-defense discretionary spending and by turning education, transportation, and job training programs into block grants as well as block-granting Medicaid. Block grants dole out a fixed amount of money to the states to administer the programs, rather than the federal government increasing or decreasing the money it hands out based on need. That almost certainly leads to big reductions as population growth and inflation rise; of the 11 major programs created through block grants in recent decades, eight have shrunk, some by as much as 115 percent. When welfare was turned into a block grant in the 1990s, the amount of money the government gives states froze and it has since lost 28 percent of its value, leading to huge declines in how many people are served.

“People are going to go nuts yelling about those programs. … I don’t care,” Kasich told the AP.

At the same time, he would increase military spending by $102 billion, or 17 percent, over eight years.

Kasich has tried such experiments in Ohio. He pushed through massive tax cuts — more than $3 billion — that reduced the burden on the wealthy but increased it on everyone else. He also balanced the state’s budget, eliminating its $8 billion deficit, while keeping to his pledge not to raise taxes to do so, which necessitated huge spending cuts. The cuts so severely reduced funding for cities and towns around the state that they had to resort to massive layoffs and even in some cases disincorporate.