The ink on the Republican tax bill blueprint was still wet when Rep. Erik Paulsen (R-Minn.) shared morning coffee with MPR’s Cathy Wurzer.
It was late September. GOP leaders had unveiled what could become the most significant tax code overhaul in generations, the centerpiece of which is slashing the corporate rate by around 43 percent.
Paulsen, who represents a district that wraps around the western metro from Chanhassen to Wayzata to Coon Rapids, sits on the House Ways and Means Committee, the body tasked with banging out the bill’s details.
“That’s a great question,” Paulsen told Wurzer after she asked how “big tax cuts for everyone” would benefit low-income and middle class earners.
The lawmaker offered scant details. He spoke instead of simplicity. Paulsen mentioned how shrinking the number of tax brackets from seven to four would free many Americans from ever again hiring H&R Block or buying TurboTax.
Paulsen noted how the country’s 35 percent corporate tax rate is “punishing American manufacturers and American workers.”
When Wurzer questioned whether the elimination of certain deductions that help working families would ultimately hurt the middle class, Paulsen returned to the safe haven of "simplicity." He said the legislation would make filing returns “so simple,” taxpayers could “complete it on a postcard.”
The tax reform bill, Paulsen concluded, is all about “boosting paychecks.”
But whose paychecks?
Under the measure, businesses would reap $1 trillion in savings over ten years with the corporate tax rate slashed from 35 percent to 20 percent. In addition, the nation's wealthiest families would enjoy some $200 billion in tax relief during the next decade by exempting an estate’s first $10 million from taxes. The plan would kill the estate tax altogether come 2024.
Meanwhile, a couple with two kids, a mortgage, and a $120,000 household income will likely see a tax increase because personal exemptions — $4,050 for the taxpayer, spouse, and each child — would be nixed according to the GOP initiative. Certain deductions that had helped to temper their tax liability, like health care costs, would be eliminated too.
The nonpartisan Center for Responsive Politics tracks money in politics. Paulsen has fundraised more than $18 million since 2007, according to its latest tally. Among the lawmaker's top 20 career contributor -- a list that includes Target, UnitedHealth Group, Medtronic, and General Mills -- all but two are corporations.
A recent Star Tribune analysis concluded "at least 34 of Minnesota's 50 largest publicly traded corporations could enjoy lower tax rates" under the GOP tax plan. UnitedHealth's annual tax hit could be halved, the paper noted. The measure would also provide a nice tax discount for Medtronic, 3M, and General Mills, which collectively have about $9 billion in cash warehoused outside the U.S.
Meanwhile, Paulsen is currently reloading his campaign war chest for 2018's election. It's not the little people sending checks. He's already amassed about $1 million, of which only three percent comes from folks donating less than $200. Messages left at Paulsen's office were not returned.
Hamline University professor David Schultz characterizes Paulsen as a willing pawn in a larger tragedy.
"The Republicans' plan might have a few bones that might benefit some in the middle class," says Schultz, “but they're just meant to buy off the opposition to a tax proposal that's benefiting the corporations and the wealthiest of our society."
Paulsen contends that cutting corporate taxes will repatriate the dollars, which means they'll be spent on domestic investment like job creation.
"If we go back in time all the way to the 1930s," Schultz says, "there's no correlation between the highest tax rates on corporations and the wealthiest individuals and economic growth. It's a myth. We also know when we've given corporations huge tax breaks, they don't plough it into reinvestment, it goes to profits and shareholder dividends.
"My fear here is, the poor and the middle class will be worse off to the benefit of the most affluent."