- Joseph StiglitzNobel Prize-winning economist, Columbia University professor and chief economist for the Roosevelt Institute. He served as chair of the Council of Economic Advisers under President Bill Clinton.
Nobel Prize-winning economist Joseph Stiglitz joins us to critique the Republican tax plan that could face a vote as early as Friday. The sweeping legislation would overhaul the tax code in order to shower billions of dollars in tax cuts upon the richest Americans, including President Trump’s own family, and repeal the Affordable Care Act’s individual mandate. Stiglitz is a Columbia University professor and chief economist for the Roosevelt Institute. He served as chair of the Council of Economic Advisers under President Bill Clinton.
AMY GOODMAN: This is Democracy Now! I’m Amy Goodman, with Nermeen Shaikh.
NERMEEN SHAIKH: On Wednesday, Senate Republicans took another procedural step forward to pass their sweeping tax overhaul, setting it up for a vote on Friday. President Trump’s tax plan would overhaul the code in order to shower billions of dollars in tax cuts upon the richest Americans, including President Trump’s own family. The plan would slash the corporate tax rate from 35 percent to 20 percent and reduce individual tax rates, though those changes would be temporary. The bill would also repeal the Affordable Care Act’s individual mandate. Trump touted his tax plan at a rally in Missouri Wednesday, where he claimed he would not benefit from the legislation.
PRESIDENT DONALD TRUMP: So, right now, America’s tax code is a total dysfunctional mess. The current system has cost our nation millions of American jobs, trillions and trillions of dollars and billions of hours wasted on paperwork and compliance. It is riddled with loopholes that let some special interests, including myself, in all fairness—it’s going to cost me a fortune, this thing, believe me. Believe me. This is not good for me. Me, it’s not so—I have some very wealthy friends. Not so happy with me. But that’s OK. You know, I keep hearing Schumer: “This is for the wealthy.” Well, if it is, my friends don’t know about it.
AMY GOODMAN: If the Senate approves the tax bill, it would need to be reconciled with a version already approved by the House before being sent to the White House for President Trump to sign into law.
Well, for more, we’re joined by the Nobel Prize-winning economist Joseph Stiglitz, Columbia University professor, chief economist for the Roosevelt Institute, served as chair of the Council of Economic Advisers under President Bill Clinton, author of numerous books, including, just out this week, his newly revised and updated Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump.
It’s great to have you back, Professor Stiglitz.
JOSEPH STIGLITZ: Nice to be back.
AMY GOODMAN: Start off by assessing what this tax plan is in the Senate and what you feel it needs actually to be to serve this country.
JOSEPH STIGLITZ: Well, it’s labeled a reform, but it’s not a reform. You know, the principle of what a reform would be—simplification, getting rid of all the loopholes and ensuring that the corporations actually pay the statutory rate. The official rate is 35 percent, but the average take from the corporations is much lower than that. What this does is lowers the rate still further, doesn’t really fix the loophole. So, when it says the statutory rate is 20 percent, they actually will be paying much lower than that. The famous case was Apple, where they were stashing their profits in Ireland and paying less than 1 percent of their profits as taxes.
So, they won’t really be closing many of the loopholes. A few of the problems will be addressed, but most of them will not. In fact, what they are opening up is a new set of loopholes. We call them, officially, tax arbitrage. When you have a rate on corporations of 20 percent, but ordinary individuals pay a higher rate, then you have a problem of what do you do with small businesses, unincorporated businesses.
So now they create another rate, for what they call pass-through. Well, that sets up incentives for people to try to convert their income from ordinary income into a pass-through. So, what they’re opening up is a whole new set of complexities. The rulebook about when you can and cannot convert something from ordinary income into a pass-through will be complex. Everybody says, you know, it’s going to be really, really difficult. Doctors will be able to convert part of their business into a holding company that owns the real estate. Is that a business, or is that a personal service company? So—
AMY GOODMAN: And how will it benefit Trump, these pass-throughs?
JOSEPH STIGLITZ: Well, it’s very clear that the overall reduction of rates, including the pass-throughs, are going—
AMY GOODMAN: I think he has something like 500 of them, the Trump Organization?
JOSEPH STIGLITZ: Exactly. They are going to be mass winners of this. Now, it would really be interesting for him to release his tax returns and say, “OK, here’s the tax I paid under the old law, and here’s the tax I pay under the new law.” And that would be able—that would enable us to see: Is he telling the truth? But, you know, we’ve never seen him tell the truth before, so why should we expect—on this particular issue, where he has deliberately taken a stance he’s not going to release the tax returns, why do we expect him to tell the truth here?
NERMEEN SHAIKH: Well, let’s go back to Trump speaking Wednesday. He said that the Senate tax overhaul would eliminate certain loopholes for corporations.
PRESIDENT DONALD TRUMP: The plan that senators will be voting on this week, hopefully as soon as possible, closes the loopholes that corporations use to shift their profits to tax havens, and it eliminates deductions for CEO salaries over $1 million. You see what some of these people are making. A little ridiculous. I’m driving up their stock, they’re making a fortune, then they go to their board, and they tell everybody what a great job they’re doing. But what am I going to do? And many of them, honestly, I don’t like.
NERMEEN SHAIKH: So that’s Trump speaking Wednesday. Now, he says that the loopholes that his tax plan will close are the ones that corporations use to shift their profits to tax havens and that it eliminates deductions for CEO salaries over $1 million. Now, is that correct?
JOSEPH STIGLITZ: Well, part of the thing is, we don’t have the text of the tax bill. It’s not been written, or they’re just trying to finish it. So, it’s really difficult for us to see. And certainly, the newspaper coverage has not clarified what they’re doing.
In the case of what he called this money abroad, what they’re going to do is change the law so you’re just not taxed on the money abroad. So, it used to be that you were taxed on it, until you—you didn’t have to pay the tax until you brought it home. So, the answer to that is not to tax it at all. Of course, that’s not going to be hurting the companies. They’re just not going to be taxed. So it really encourages them to engage in the business offshore in some low-tax jurisdiction, because they get to keep the—they will never be taxed on that money. It’s called the territorial system. So it actually will be a further lowering of the effective tax rate on corporations.
AMY GOODMAN: Professor Stiglitz, you’re a professor at Columbia University. Yesterday, we had a graduate student on, and there was a massive graduate student walkout across the country yesterday because of what’s written in the Senate bill. Can you once again talk about this and how this is going to affect higher education, and the attitude toward education that this reflects?
JOSEPH STIGLITZ: Yeah. There’s almost a kind of vindictiveness of this. You know, it’s not only taxing graduate students, and tuition that they—
AMY GOODMAN: So they get tuition waivers, but they’re taxed on the—
JOSEPH STIGLITZ: They don’t see the money, but they have to pay a tax bill. But they’re also taxing the endowments of private universities. You know, our universities are one of the strong institutions in the country. And if you look at where is our successful growth, it’s Silicon Valley, it’s high tech. Where does that come from? It comes based on the research that go on mostly in these private universities. Stanford—the reason why Silicon Valley is where Silicon Valley is, is Stanford University. The research that goes on at Harvard, MIT, Caltech is really pivotal to our country. And yet, there is an anti-science attitude.
Let me connect this with some of the other things that were going on. Basically, there is an attitude against truth, against the mechanisms, our institutions, by which we ascertain what is true and is not. They’re against climate science, climate change. The coal industry doesn’t like it. They get campaign contributions from the coal industry. So they don’t want people to know what science says. Ninety-nine-point-nine percent of scientists say that climate change is real. And yet they’re trying to deny it. So I think you have to see it in terms of this big picture of undermining our institutions of how we tell what is true and what is not.
AMY GOODMAN: Speaking of big picture, talk about the tax plan and what it means for the rich, the middle class, the working class, the poor in this country. Where is the money shifting to, even as we just heard President Trump saying, “The wealthy don’t like me,” he said.
JOSEPH STIGLITZ: Yeah. So, you have to begin with understanding what is one of our country’s biggest problems. It’s the growing inequality. Globalization, I wrote about in my book, Globalization and Its Discontents Revisited, one of the reasons for this growth in inequality is globalization. So, this is clearly one of our key problems.
And yet, what does this tax plan do? When it, you know, goes through, they put in some temporary provisions to sort of get through the next election, but beginning in the middle of the next decade, after that, those whose income is under $75,000 are actually going to see a tax increase, on average. So, it’s not a tax cut for the ordinary American. It’s a tax increase. What is permanent is the tax cut for corporations and the tax cuts for these pass-throughs. And so, taxes on the billionaires, taxes on the millionaires are going to go down.
So it’s—and there’s another aspect of this that perhaps hasn’t gotten emphasized as much as it should. There is an assault against states. Deductibility of state income and property taxes are going to be limited, in some cases eliminated. What is that going to mean? It’s going to be harder for states to raise money. What does that mean? It’s going to be harder to finance education, basic services that we provide at the state level.
And so, as we try to compete in a globalized world, which the president talked about yesterday, the importance of competition, what’s the most important part of our competition? Having a strong education, an educated labor force, the ability to provide the kinds of services that the states provide. That’s what makes us competitive. And yet he’s eroding those basic things that make America strong.
AMY GOODMAN: We’re going to break and then come back to this discussion. Joe Stiglitz is our guest, the professor at Columbia University, the Nobel Prize-winning economist. His book is just out. It’s newly revised and updated, Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump. We’ll talk more about it in a minute.