U.S. Tax Plan’s Spiraling Consequences for Human Rights and Poverty – At Home and Abroad

As the United States Congress considers drastically altering its tax code, my organization — the Center for Economic and Social Rights (CESR) — has brought the spiraling human rights costs of the proposed U.S. tax cuts to the attention of a leading UN human rights official visiting the U.S. to look into poverty in the country.

On Dec. 1 – the morning before the U.S. Senate rushed through a lopsided and dysfunctional tax plan to unfairly benefit the top tiers of the economy while costing ordinary people within and outside the U.S. dearly — the UN Special Rapporteur on Extreme Poverty and Human Rights Philip Alston launched his official visit to the US to investigate the links between the growing phenomenon of poverty and human rights deprivations there.

In advance of his visit, we made a formal submission entitled Fiscal Impoverishment in the United States, warning that the Republican-backed tax plans would only deepen poverty and inequality within the U.S., while also enabling transnational tax abuse and undermining the ability of countries around the world to invest in human rights.

Undercutting Human Rights and Impoverishing People in the U.S.

Forty-five million people, or one in seven Americans, live in poverty. Since the 2008 financial crisis, 95% of income growth has gone to the top 1% of income earners. These economic disparities intersect with shocking racial and gender disparities in access to quality education, healthcare, housing, fair wages, and wealth.

Tax and fiscal policy is hardly disrupting these regressive tendencies — for three main reasons. First, federal, state, and local entities lack sufficient resources to invest in pro-poor and equalizing public policies. As a whole, the U.S. brings in much less revenue (25% of GDP) than its comparative countries in the OECD (35% of GDP). Second, the current tax system is not particularly useful at fighting economic inequality. While Federal income taxes are mildly progressive, for example, state- and local-level taxes in every state in the country impose higher effective tax rates on poor families than on the richest taxpayers. Third, fiscal decisions in the U.S. struggle with transparency and accountability deficits, which allow private interests — rather than the public good — to dominate policymaking.

The tax bills debated in the U.S. Congress — driven by wealthy Republican party donors — double down on these human rights disparities by stripping the tax code of much of its progressive elements. The plan to cut the corporate income tax rate to 20%, combined with provisions for “pass-through” businesses and estate tax exemptions, are designed to divert public resources from the federal government, while creating massive loopholes, which will empty the public purse of at least $1 trillion over the decade.

Even more U.S. companies will get away with paying no taxes at all, while low-income workers will be forced to pay proportionally more taxes. If the plan goes through as is, companies and high-net-wealth households will enjoy an even lighter tax burden, while a majority of taxpayers in the lower 95% of the income spectrum would pay more in taxes after ten years, just as the social services essential to fighting poverty and inequality (such as Social Security, Medicaid, early childhood education, Pell grants, and the Supplemental Nutrition Assistance Program) are cut.

As designed, the costs of this self-inflicted $1 trillion budget hole will be borne by the poor and disadvantaged in the U.S., only widening already obscene levels of social and economic inequality.

The bill’s plan to repeal the Affordable Care Act’s individual mandate provision to finance the proposed cuts is one of the most glaring aspects of its direct effects on social rights. With removal of the mandate, healthier individuals would most likely opt out of the health insurance markets, disproportionately raising premiums on those from lower- and moderate-income households. 13 million people will likely lose health insurance, which some have estimated to result in 10,000 avoidable deaths.

This historic disinvestment in public services will also drive discrimination and widen social disparities. For example, women’s unequal burden of unpaid care work will rise, as their rights to work and education are restricted, we argue in the submission. Due to the positioning of disadvantaged groups within the economy, the tax bill will likely also cause disparate and discriminatory impacts on childrenyouthpeople of color, the LGBTQ communityimmigrants, and people with disabilities.

All in all, the tax bill debated in Congress is an all-out assault on human rights — within the U.S. and also abroad.

Empowering Tax Abuse Worldwide

While the details are being worked out now, the plan to move to a territorial tax system will give multinational companies increased opportunities to avoid taxes, while unleashing an ever faster “race to the bottom” in corporate tax rates across countries — as recognized by the International Monetary Fund. The United States was a premiere “on-shore” tax haven even before this new legislation. Yet, the coming boost in tax avoidance and the distortion toward lower rates will impose an even deeper material cost on poorer countries around the world, undercutting their redistributive capacities to reverse growing economic and gender inequalities and undermining their fiscal space to invest in services essential for people to enjoy their human rights.

Who pays for what public services, and who truly benefits, are fundamental questions at the heart of any effort to combat poverty and realize human rights. For this reason, we urged the UN Special Rapporteur to address the fiscal foundations of human rights in the United States, and to call on the U.S. government to halt the redistribution of economic gains towards the wealthy few and ensure instead the resourcing of economic and social rights for all people, particularly those living in poverty.

This follows a series of instances in which we at CESR have raised awareness about the human rights implications of proposed U.S. tax changes since the worldwide Tax March in April 2017. Together with national allies in the tax justice, financial accountability, and human rights communities in the U.S., we will continue to bring these concerns and their international implications to the attention of human rights bodies and policymakers, as part of our goal to hold all governments accountable to the widespread demand for an end to the injustice of growing inequality.

Realizing this goal, in the U.S. and elsewhere, will require a new vision of tax policy which ensures sufficient, equitable, and accountable resourcing of human rights for all, without discrimination.

Niko Lusiani is the Director of the Human Rights in Economic Policy program at the Center for Economic and Social Rights.