The GOP tax plan would blow a hole in American science

Dec 13, 2017

By Julia Belluz

If you thought the Republican tax plan was just about huge tax cuts for the wealthy, think again. It’s also a major attack on science.

To understand why, let’s step back a bit. The scientific enterprise in America heavily relies on grad students. They do mostly invisible work in thousands of labs and research institutions across the US, on everything from basic research about human cells to clinical research on how to cure cancer. Their contributions are essential to running studies.

In exchange for that labor during their training, the federal government gives them a break on their taxes.

Very simply, grad students get their tuition and other school fees waived while they’re teaching or researching. When tax season rolls around, they’re exempted from having to pay taxes on that money (which never hits their pockets).

But under the House version of the tax bill, these waivers would become taxable income. “This means that MIT graduate students would be responsible for paying taxes on an $80,000 annual salary, when we actually earn $33,000 a year,” explained one MIT grad student, Erin Rousseau, in an op-ed in the New York Times. “That’s an increase of our tax burden by at least $10,000 annually.”

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17 comments on “The GOP tax plan would blow a hole in American science

  • The kleptocrats kill the goose, so pathological and urgent is their need.

    They stupify the demos with crap education to leave them needy and biddable, and now finish the job by flipping the tax burden away from themselves and burden the creators of future wealth.

    Americans! Notice the kleptocrats…. and no it isn’t just Trump.

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  • I thought the GOP tax bill (both House and Senate versions) raised taxes on the upper-middle class? In one of the versions, the top bracket goes from 39.6% to 37%; but even at 37%, the top 5% of tax-payers are still going to pay well over 50% of the federal taxes collected (the bottom 50% only pay 3% of the taxes collected by the federal government).

    Why is it the responsibility of the federal government to fund graduate research? Why shouldn’t the federal government just collect the same percentage from everyone and not subsidize anyone?

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  • Of course, a government could remain passive in the face of making long term investments in the future profitability of the state. It could further not spend tax dollars on military technology development. (Currently 60% of all R&D spend is government military spend, often with only peripheral military application. It is commercially pump-priming its own industries.)

    Should there be some act of faith operating that should keep R&D investment out of the hands of government? A faith in free-market dogma? How do long term investments happen in the current financial market with its current casino-type, short-term, zero-sum investment cycles?

    Read Bad Samaritans (by Ja Hoon Chang) to see just how recently free market dogma began operating in free market champions like the UK and US and how economic growth declined in comparison. Dirigistes and partial dirigistes on the Pacific Rim eat our lunch.

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  • Sadly it looks like the Repugs have enough votes to pass this awful bill which I think we can also surmise will have more holes in it than a sieve because it’s been rushed through so quickly. The rich and corporations will benefit handsomely and the national deficit will continue to go through the roof, probably by another 1.5 trillion dollars over 10 years. Now that the Obamacare Mandate is dead so people aren’t forced to buy insurance the young and healthy won’t and premiums will soar for those who do actually need care. That will stop even more people buying it and millions will die before their time. None of them rich of course so who cares.

    The already crumbling infrastructure has even less chance of being fixed and the only way to cut spending will be on science, education, parks or in short everything except the military. It is however an excellent way to cut immigration because who will want to come and live in the shithole that Trump is creating? If you actually sit back and analyse what Repugs are doing then it isn’t so much different from that supposed epitome of awfulness, North Korea. Subjugate the working classes and divert all the money to the rich and the military.

    It’s not just that it makes no economic or ethical sense, it makes no political sense. Trump’s support is dropping faster than a movie mogul’s trousers when an actress comes into his office and soon only a few diehard supporters are not going to realise how badly the party they voted in is screwing them.

    But you can always bank on one inevitable thing – the utter stupidity and goldfish like memory span of the American electorate. No matter how badly Repugs treat them they’ll forget it all as soon as the Dems get back in to try and fix the mess because fixing messes takes time but Americans want instant gratification so they’ll get fed up of the Dems and vote Repugs back in to do even more damage in the next round of this stupid seesaw.

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  • My fear is that the Dems will fix it for the middle classes, rather than focus on the poorest because that’s too big a reach ideologically. This will remain difficult for Americans to do because poverty is a too much seen as a “just dessert” and justice must be served.

    The tax take in the bottom half of American society probably costs more to collect than its value. (Thanks Jason) But justice dictates that this is not just seen as a wash and left where it usefully is nor that that wealth will never be stashed away off-shore but every cent will go back into the economy, unlike tax cuts for the very wealthy. More vigorous progressive taxation than that in the US benefits all society from bottom to top. Giving it to the wealthy who have sequestered fully 20% of their wealth outside of their own economy is to impoverish the economy.

    Tax incentives for the rich are possible if policies target this missing money and encourage it back into useful investment. Taxing each trading action to make casino style, short term, zero sum, transactions far less profitable and positively incentivising, (eg with a degree of securitising much longer term on shore investments in preferred directions (like sustainable, circular industries and services and R&D programs), will do the trick, making their money work for them, but also, do specific good for the country, even help wean the nation off the subterfuge of pretending to invest in military R&D as a way to invest in mainstream businesses.

    Neoliberal dogma needs severe adjustment to make better capitalists, who understand the totality of a society’s role in theirs.

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  • Phil,

    Suppose I am one of the wealthy who has sequestered 20% of my wealth outside the US. If it is my wealth, do I not have the right to do with it what I want? If I have 100 trees on my property, can’t I cut down 20 of them to make furniture for my living room? Why is it that someone else, namely the state, has the right to tell me what to do with what is mine?

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  • Jason, states have always set the legal requirements for taxation, how much and on what, and on the flow of assets into and out of their own country. You have never lived without some loss of jurisdiction over your own money.

    But notice, I am (notionally) doing none of that. I am not obliging people to do anything, merely taxing zero-sum short-term casino style trading, and incentivising on-shore, long-term investment with added governmental security to attract off shore dead money back into the economy and target it at building sustainable businesses.

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  • Jason: “If it is my wealth, do I not have the right to do with it what I want?”

    A thought experiment might be helpful. Imagine that you became fabulously rich and came to own 80% of all the country’s wealth. Since it is yours, is it not your right to place it in offshore accounts, leaving this country to ruin?

    What is legally right is not always what is morally right. Legal rights are abstractions, based on moral reasoning. There can be good laws and bad laws. One relevant consideration is that even if you come to legally possess a large amount of wealth, the fact is that you did not create that wealth. If you own a company, you did not educate your employees; you did not create the market; you did not pave the roads; you did not create the legal, financial or physical environments that allowed you to obtain that wealth. In many ways, you reaped where you had not sown, to use a biblical phrase. Many rich people create no value at all, but simply take (our current POTUS is a prime example). The relationship is that of a parasite to a host.

    On the other hand there are people who create enormous “added value”, but who are never adequately compensated for it. Public school teachers who educate and inspire the next generation of value producers come to mind.

    Just because you have a legal right to wealth you did not create, but which the laws of this country allowed you to take, doesn’t mean it’s morally right to take that wealth out of the economy and store it in offshore accounts. If the laws allow you to do that, they are bad laws and need to be replaced. Your “right” amounts to legalized theft. You may argue about your “rights”, but don’t confuse legal abstractions with issues of justice and morality.

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  • Lee, I’m right with you on morality.

    But my argument is that even if a person could honestly claim to have earned all those millions and billions, it would still be in their interests to rather more share it than happens in say the US. In terms of governmental spend it would take quite a small proportion to lift the poorest out of dire poverty and would go to further lift the economies of those local to the poorest. Political stability would be enhanced and thus investability also.

    Back on morality…

    Americans are notable in having a fetish for the individual and a dislike of society and its first proxy, the apparatus of the state. They both, unfairly blame and overly praise individuals, like society held no guilt in the apparent crimes of its citizens nor facilitations in their successes. Americans lock up their citizens seven times as much as Europeans and reward their bosses so much that the average American must work an extra eight hours a week compared to a German for the same standard of living. Society deserves some of that blame and some of that reward too.

    Once the Republican party fought for the little guy, fought tooth and nail against monopolies while the Democrats supported free trade and the southern plantations against Republican protectionism that allowed nascent homegrown industries to flourish and create jobs for all.

    All that changed after the seventies when economist mathematicians learned a spectacular trick in gaming the money markets. If you gamble on the money markets with the biggest stakes you can, you mostly always come out ahead. Reagan and the bankers paved the way for creating huge-valued gambling chips (using bundled mortgages etc.) that allowed traders to acquire other people’s wealth quickly, without needing to invest in anything so risky as a new business. The gambling even worked if the chips you played with had little real value. Once you’d tricked some value out of others it didn’t matter so much that mortgages were sub prime, worth less than face value. Republicans lost most of their moral position at this point, and chose no longer to offer a square deal for the little guy or even having the common human decency to warn all about the risk of an military-industrial complex like Eisenhower prophetically did.

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  • Jason, are you planning to stay in the US with police protection, military services and the roadway system?
    In society, you are receiving the benefits of a civilized society that came before you.
    To deny your responsibility as a tax paying citizen is futile and irresponsible.

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  • LeeNLP #8
    Dec 17, 2017 at 1:46 pm

    A thought experiment might be helpful. Imagine that you became fabulously rich and came to own 80% of all the country’s wealth. Since it is yours, is it not your right to place it in offshore accounts, leaving this country to ruin?

    It is worth realising that most of a county’s wealth is not “owned”, but is controlled rather than owned, by the ultra rich, via corporations!

    Commercial banks are put in charge of vast resources from central banks, and allocate this money to corporations on the basis of expected returns.

    This means that when people like Trump gamble and fail in business, the banks are repaid as a priority, business from any other bank customers covers the shortfalls, and people like small businesses and employees lose out through the bankruptcy.
    When they mess-up big-time as in the sub-prime scandal and property inflation bubble, the tax payers bail out the banks rather than have the whole economy collapse, while government stooges make the citizens repay the banks’ losses through “austerity”!
    This is why the cuts in corporation tax to provide super salaries and bonuses for executives, along with share incentive schemes for directors (where options to buy shares worth many £ $ can given as bonuses or bought for a few pennies), are rewards for gamblers, who gamble for personal gain, with loans of other people’s money.

    Corporations depend on public systems of law, regulation, waste disposal, and of transport, for their businesses to function, and (in developed countries), for their employees and other citizens, to have decent standards of health and life.

    Backward unregulated countries can “liberate” more money for corporations, if they do not bother with regulatory standards, although their exports may be blocked by civilised countries who protect their own citizens from dangerous shoddy goods!

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  • Alan4discussion #11

    Dec 18, 2017 at 5:40 am

    That’s right.

    And the massive deficit that will be created by these cuts will mean less money in the treasury. Public education will suffer (although I am not quite clear where funding for public schools comes from; but I assume that it will suffer, along with so-called “entitlements”). Then we have DeVos with her mania for bad religious charter schools, which will keep people dumbed down. It’s all so sinister and – dare I say it – conspiratorial. What the hell do these people want, a return to the gilded age?

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  • P.S. Let me rephrase that. These massive corporate tax cuts means all that money won’t be going into the Treasury. (I don’t fully understand the subject of deficits, frankly; never have; although I do know that it means “spending cuts” and that isn’t good.)

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  • Dan #13
    Dec 18, 2017 at 7:00 am

    (I don’t fully understand the subject of deficits, frankly; never have;

    Deficits, mean that the government – instead of raising taxes for “pay-as-you-go” services, will pay for them with borrowed money, and charge the repayment of capital and the interest to the future tax-payers!

    Some of the ulta-rich can use their tax-break money to lend it back to the government by buying government bonds, and receive interest payments on it as well as having other tax-payers repay “their investment” at some future date, when the bonds mature!

    It’s like a hire-purchase agreement, with those who actually pay tax making the repayments!

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  • An interesting snippet from today.

    Last-Minute Perk for Real Estate Tycoons Ended Up in Tax Bill

    This weekend, the folks at the International Business Times were taking a look at the GOP tax bill, and they noticed something interesting: In the individual bills passed by both the House and the Senate, the 20 percent deduction for “pass-through” entities was limited to businesses that hire (and pay) many employees—construction firms, for example, or large medical practices. In the final version of the bill that was put together by the conference committee, however, this privilege has been extended to firms whose primary stock in trade is real estate. For real estate firms, generally speaking, wages do not make up a large portion of their costs, since most of their money is invested in land and in buildings.

    This change to the bill raises unpleasant questions for the GOP on two fronts. First, the justification for the deduction is that it will “create jobs.” Even when it comes to labor-intensive operations, it’s unclear as to whether or not it really works that way. However, when it comes to capital intensive operations, there’s no question that it doesn’t work that way. And so, the stealth addition certainly makes it seem like “job creation” was just a convenient cover story.

    Beyond that, however, is the fact that some key people in Washington stand to benefit handsomely from this new provision. There’s a fellow who lives at 1600 Pennsylvania Avenue, for example, who has invested a little bit in real estate. The two wealthiest Republicans in the Senate also have extensive real estate holdings. That would be Jim Risch (R-ID) and…Bob Corker (R-TN). Corker, who switched to a “yes” vote at the last minute for reasons he could not clearly explain, is shocked—shocked!—that the provision found its way into the bill, and says he wants answers as to how it happened. And while he’s waiting on pins and needles for a response from conference committee chair Sen. Orrin Hatch (R-UT), perhaps Corker will pay a quick visit to his accountant. (Z)

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  • @OP – If you thought the Republican tax plan was just about huge tax cuts for the wealthy, think again. It’s also a major attack on science.

    Well governments need to run up massive deficits [of taxpayer debt] to look after “those poor deprived wealthy”! – So let’s celebrate! 🙂

    If you earn an average UK salary, by the end of today a top boss will have earned more than you do all year.

    In fact, it takes a top chief executive just three days to earn £28,758.

    The day has been declared “Fat Cat Thursday” by think tank the High Pay Centre and HR industry body the CIPD, which calculated the figure.

    The gap between executive pay and the rest of the workforce remains huge despite top bosses’ pay dropping by a fifth last year.

    The average boss of one of the UK’s largest 100 listed firms earned £4.5m last year, down from £5.4m the year before.

    Nonetheless, an average chief executive still earns 120 times more than the average full-time worker, according to the High Pay Centre.

    Its calculation assumes that the executives work 12 hours a day, most weekends and take just 19 days holiday a year.

    At this rate, it means bosses only need to work 32 hours – taking them to Thursday, assuming they started work on 2 January – to reach the median full-time employee salary.

    The think tank has made the calculation for the past four years, and High Pay Centre director Stefan Stern said its figures showed there were still “unjustifiable [pay] gaps between the top and the rest of the workforce”.

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  • China institutes legislation to tackle their poor GINI coefficient (recently as bad as the US) and recognise that the rural poor have been left behind the rest, excluded mostly from the 40 years of sustained (5 to 7%) income growth year on year. The package is clever, integrated and eco, positioning rural farmers to be at the heart of a new sustainable agribusiness, and is intended to deliver 12.5% growth for the sector. Two birds, one stone.

    America has ever worsening inequality which will be hurried along by this impoverishment of the state only to put most money into the richest pockets. Quite without this, the necessary hacking away at government spending, welfare and education, (never the military given the demonisation of N.Korea and Iran and stoking Israel for a fight in the region.) that they can now justify, will be a double blow to the poor. The uber-mensch will bring third world jobs back to the US, by virtue of creating a third world work force.

    Boglingly consistent ratecheting up of inequality.

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