• Daniel Ethan Finneran

Tax Reform Looks Greek To Me

November 2017

I, much like our Founding Fathers, have an inexplicable affinity for all things Greek. Less so, I should clarify, for the Greece of modernity, but rather for that of antiquity. From the Heroic to the Homeric Ages, and through the greatest experimental political epoch the world has yet seen, we’ve seldom faltered when adopting into practice its best successes. Greece gave us the seeds of our art, philosophy, and science—in that order—in a uniquely and enduringly Westernized way. And, more importantly, it gave us the Hellenistic harbingers of a new democracy to come.

Bearing this in mind, I find myself looking favorably upon President Trump’s recent tax-reform plan; it appears well-rounded and propitious. If forced to phrase the plan in a pithy pitch, I would say this: the poor will be made less poor, while the rich will be made slightly more so—but not egregiously so. Trump’s plan, which was sedulously developed by Steve Mnuchin and Gary Cohen amongst others, consolidates seven tax brackets into four, decreases the corporate tax rate from thirty-five to twenty percent, keeps in place previous taxes on dividends and capital gains, removes the outlandish price of stadium construction from the public’s purse, and reduces (with an eye toward eventually eliminating) the estate tax.

Undoubtedly unintended, and in recondite ways, the plan roots itself in pre-Socratic economic history. Suffer me, if you will. In the sixth century before Christ, Solon, the polymathic statesman and poet, acceded to the archonship in ancient Greece. Solon’s ascension succeeded that of Draco’s (whose name survives—albeit in an adjectival form—to describe a law considered by today’s standards too severe. Death, even for a theft deemed relatively petty, was not an uncommon end).

Solon stepped to the fore during a time of civil unrest, which very easily might’ve devolved into factional revolution. At the time, Athenian society was stratified in such a way that class warfare seemed a fast-approaching inevitability. The poor, although a majority, were impotently helpless in their penury. Their futures were without promise and their plight without end. The rich were fewer but more firmly entrenched. With them, the powers of the state presided, because—from them, the plutocracy was founded.

In light of this tumultuous time, Solon might have been an autocrat, siding himself with the landed aristocracy or he might have been a demagogue appealing to the aggrieved peasantry. Either route would’ve seemed natural in the throes of such an uncertain time. Instead, he sought a middle-way and a compromise.

He enacted his famous seisachtheia, or “the removal of burdens” (literally, the “shaking” of burdens). The sweeping decree eliminated “all existing debts, whether owing to private persons or to the state”, as Aristotle tells us like a modern-day actuary. In one swift move, obligations vanished, slaves and serfs were set free, and Athens was left to prepare itself for what would become its impending, lasting prosperity.

This, of course, is nothing like what President Trump’s tax plan entails—much to the creditor’s delight and the debtor’s chagrin. No, he and Solon converge not on what is today financially infeasible, but rather on this second point: both simplified their respective governments in the creation of four tax brackets. For Solon, these brackets included the pentakosiomedimni, or five-hundred bushel men (these men stood atop the income ladder), the hippes, the zeugitai, and the thetes at the very bottom. The taxation was progressive, with rates increasing the nearer to the top you climbed. In most cases, the thetes were happily immune from taxation altogether—though they couldn’t hope for auspicious military commissions.

Under President Trump’s plan, replacing Solon’s sesquipedalian pentakosiomedimni are America’s five-hundred…thousand…dollar bushel men. This group, whose earned income would be taxed at the uppermost and unchanged 39.6 percentage, would include those making above $500,000. This is an increase from the $418,000 applied in years prior. For those earning between $200,000 and $500,000 (the corresponding hippes, if we are to continue our Solonian example), the tax rate would be 35%. It is this group of earners who stand to lose the most. Previously, this percentage was applied to a small sliver of earners in the four-hundred-thousand-dollar echelon. This percentage increase, if accepted by Congress, will expand to include many more people. At last, we reach the zeugitai and the thetes. Respectively, these lowest earners would be taxed at 25% and 12%.

For indigent Americans at the lowest economic rung, this tax rate is actually a slight increase when compared with years past. Previously, those earning up to $9,325 per annum enjoyed a 10% income tax—the lowest offered. It’s unclear if a two-percent rise will have deleterious effects. Regardless, they will still have access to cost-mitigating and offsetting subsidies; the White House hopes to keep the prevailing earned-income tax credit, a Gerald Ford-era installment into the tax code that looked charitably upon the poor.

Perhaps most importantly (depending, of course, on whom you ask) the corporate tax rate would be slashed by 15%. This would bring it effectively down from its current 35% to 20%, and would bring us into competition with the rest of the industrialized world. The civilian tax cuts are integral and intimate—especially for those middle-tier folks receiving them—but it’s the corporate cut that’s the clincher. America’s entrepreneurs are the most enterprising in modern history. It’s our unfettered economic dynamism that has, since the time of our founding, distinguished us from our European and Asian contemporaries.

However, lately, the quintessence that is America’s market liberality has lost its way. For too long, businesses have been stymied and forced to outsource profitability. The whole situation is a defeat. The yoke of onerous tax rates forces American companies to look elsewhere—like Ireland or the Cayman Islands—to grow and secure their equity. By unintended but totally foreseeable consequences, the government receives much less money in return. No one wins until such burdensome corporate taxes are decreased. Make it cheaper to do business within our own borders, and everyone (including consumers, who, with a lessened tax burden, will have more disposable income to spend in the economy) will succeed.

On the surface, it seems as though Democrats would applaud this plan. Among other things—like preserving the earned-income tax credit—it accomplishes the progressive’s two over-arching goals: to increase taxes on the wealthy and to decrease them on the needy. In the end, though, the issue might be one of branding. If only for the plan’s Trump trademark, the most moderate of Democrats are likely to dislike it.

This point is important, for President Trump can ill-afford to lose Republicans’ confidence. Assumedly, the tax reform bill will pass the House, but passage in the Senate will be a different story and an altogether daunting feat. The administration’s forays into healthcare legislation proved how frustratingly true this can be. The hard-learned lesson there was that the president can’t rely solely upon his own party to pass unpalatable bills. And now, moving onward to tax reform, the cabal of past dissidents is already aligned against him. Included in this group are the familiar names of Arizonans John McCain (R-AZ) and Jeff Flake (R-AZ) and Lisa Murkowski (R-AK) and Susan Collins (R-ME). If nary a Democrat defects, and all remain unanimously opposed to Trump’s plan as they’re expected to be, it will be vital for these Republican rogues and mavericks to support the bill. If they do, they’ll be welcomed back home to the GOP, like that wayward Odysseus returning to Ithaca from the sea.

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