Abrams Rebuttal Distorted The Truth on Tax Reform, And Small Business Owners Can Prove It

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Posted: Feb 07, 2019 3:45 PM
Abrams Rebuttal Distorted The Truth on Tax Reform, And Small Business Owners Can Prove It

Source: Pool video image via AP

In the Democrat response to President Trump’s State of the Union address on Tuesday, failed Georgia gubernatorial candidate Stacey Abrams presented an idea that many advocates for small business worry may become a key component of Democrat platforms in coming elections: rolling back the GOP-led tax reform legislation of 2017.

In her rebuttal, Abrams said, “The Republican tax bill rigged the system against working people. Rather than bringing back jobs, plants are closing, layoffs are looming and wages struggle to keep pace with the actual cost of living.”

NBC News, in a piece fact-checking Abrams speech, said the largest benefactors of tax reform were corporations, something Democrats have seized on as a way to prove tax cuts are helping corporate interests at the expense of average Americans.

Trump claimed that the GOP tax reform bill would give working families relief, and while the majority of Americans — including the working class — did see a tax cut, corporations were the biggest benefactors. Corporate tax cuts are permanent, while individual tax cuts are set to expire in 2026.

However, fact-checkers with FactCheck.org rebutted the rebuttal, saying Abrams “distorted” the truth:

[W]eekly earnings, in inflation-adjusted dollars, have been going up under the Trump administration, although Abrams said “wages struggle to keep pace with the actual cost of living.” (Inflation and the cost of living are not exactly the same, but they are closely related.)

BLS data show that, as of December, real (or inflation-adjusted) average weekly earnings for rank-and-file production and nonsupervisory workers have gone up 2.6 percent since Trump took office, and almost 1.4 percent since the tax bill became law in December 2017.

For their part, administration officials are positioning the gains in the corporate sector as a push back against what they see as a growing fascination with socialism as Sen. Elizabeth Warren (D-Mass.) has recently proposed a “wealth tax” on households with a worth of $50 million or more and Rep. Alexandria Ocasio-Cortez (D-N.Y.) has supported a 70 percent marginal income tax rate on income over $10 million.

Treasury Secretary Steve Mnuchin made comments from the White House following the SOTU indicating gains in the corporate sector are advantageous to the economy in general and are a boon to all Americans.

"The U.S. economy is doing terrific," Mnuchin said from the White House. "And as the president talked about last night, his economic plan is working. We're not going back to socialism. We're going on an economic plan for America that works."

"We don't believe in a centralized planned economy where the government puts restraints on it," he said in the "Squawk Box" interview.

"Companies need to be able to allocate capital. That's something that is important to the growth of the U.S. economy," Mnuchin said. "It's a fundamental premise that if companies can't invest the capital productively, they return it to shareholders. That gives shareholders the right to invest in other areas."

Some advocates for small business and small business owners themselves agree that the 2017 tax reform legislation was an instant game-changer, allowing them to invest back in their own companies, hire employees, and give existing employees raises.

Joseph Semprevivo, owner and founder of Florida-based Joseph’s Lite Cookies, says the business climate has moved in a positive direction since the Tax Cuts and Jobs Act of 2017.

“The Obama administration was anti-worker and anti-business,” Semprevivo says. “The tax and regulatory climate was always a concern for us. It was really heightened during the Obama administration, the reason being, his rhetoric and communication indicated a lack of understanding on what makes a small business. If a business grosses $100K, that doesn’t mean that business owner is rich. They have to pay employees and invest in their business. The Obama administration didn’t seem to understand that. But then Trump hit the ground running with tax cuts and my customers who sell to other retailers immediately began to feel very confident in a way they never did in the 8 years under Obama.”

Susan Kochevar, Owner of the 88 Drive-In Theatre in Commerce City, CO, says her business — comprised of approximately 20 employees — underwent an immediate change for the better following tax reform.

“Before tax reform, taxes and regulations were just exploding and it’s hard to keep up with all that and run your business,” she says. “We’re talking about 80 thousand plus IRS codes, it’s a lot to keep up with. Bureaucrats look at small business owners as if they operate like the government. Government can tax people and they think small business can just raise their prices. But it just doesn’t work that way. Trump understands that, and he has moved to make it easier for small businesses to move faster by cutting regulations and taxes. And now that I’m not taxed so heavily, I can expand, I can pay my people more, I can buy new equipment. And as we approach tax season, I’m actually able to think about growing my business.”

Both Semprevivo and Kochevar are members of the Job Creators Network (JCN), a membership-based small business advocacy group that spent months lobbying for the tax reform legislation by traveling the country in a bus and reaching out to legislators directly.

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JCN President and CEO Alfredo Ortiz has serious concerns about the Democrat plan to roll back some of the regulatory and tax reforms the Trump administration has put in place during its first two years.

“While small businesses are still booming, there are storm clouds on the horizon. House Democrats have proposed a slew of anti-business regulations including dramatic tax hikes, job killing regulations, and a $15 minimum wage," Ortiz said in a statement. "Even if Senate Republicans succeed in blocking these bad policies, they still create business uncertainty which reduces optimism, expansion, and hiring."

Grover Norquist, founder and president of Americans for Tax Reform, says the Democrat reaction to tax reform is of concern but he doesn’t believe the Trump administration nor Senate Republicans will allow a rolling back of legislation that gives the United States a competitive edge from a tax perspective.

“By taking the corporate tax rate from 35 percent to 21 percent we went from where we had the highest rate in the world…to a place where we’re pretty competitive with the rest of the world,” Norquist said. “The United States had been an inviting place to invest but we were least inviting in terms of our tax system. So we no longer discourage that investment and we reduced the non-competitive position we had. Corporate money began to flow back into the US in the first 6 months and it didn’t just disappear. It was reinvested.”

Norquist says he thinks Democrats are mostly trying to create a platform for the 2020 presidential election.

“The campaign going into 2020 will be ‘do you want higher taxes or do you not want higher taxes?’,” Norquist says. “You can’t fund cool government programs with fewer taxes so Democrats say things like they want to be like Sweden or Denmark or Finland. But those countries have a much higher tax rate on people who make the median income. Middle income people pay a significantly higher tax. And that’s what I don’t think Cortez and company knows.”