December 6, 2017
As the United States Congress considers drastically altering its tax code, 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. this week to look into poverty in the country.
The morning the U.S. Senate rushed through a lopsided and dysfunctional tax plan that unfairly benefits 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, CESR made a formal submission to Alston 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 therefore undermining the ability of countries around the world to invest in human rights.
Undercutting human rights and impoverishing people in the U.S.
The submission makes clear the gross social and economic inequalities already characterizing the United States. 45 million people, or one in seven in the U.S., live in poverty. Moreover, 95% of income growth since the 2008 financial crisis 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. Federal, state and local entities lack sufficient resources as the U.S. as a whole brings in much less revenue (25% of GDP) than its comparative countries in the OECD (35% of GDP). Nor is the current tax system 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. Further, fiscal decisions in the U.S. struggle with transparency and accountability deficits.
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 divest 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 worth 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., widening already obscene levels of social and economic inequality," said Ignacio Saiz, CESR’s Executive Director.
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, the submission argues. Due to the positioning of marginalized groups within the economy,the tax bill will likely also cause disparate and discriminatory impacts on children, youth, people of color, the LGBTQ community, immigrants, and people with disabilities.
“This tax bill is an all-out assault on human rights – within the US and abroad,” said Niko Lusiani, CESR’s Human Rights in Economic Policy Program Director, pointing to the fact that the Republican tax overhaul would also have serious international implications.
Empowering tax abuse worldwide
As explained in CESR’s submission, 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 the United States was a premiere “on-shore” tax haven even before this new legislation, 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.
The Special Rapporteur will make his way across the United States this week exploring the range of human rights deprivations that those living in poverty experience in the world’s wealthiest economy. The U.S. is one of the few countries in the world, along with Saudi Arabia and South Sudan, which has not ratified the International Covenant on Economic, Social and Cultural Rights. However, it is party to other international human rights treaties which impose clear obligations on states to align tax and fiscal policy with human rights principles of equality, non-discrimination, transparency and accountability.
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, CESR has urged the 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.
CESR has been raising 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, development and human rights communities in the U.S., it will continue to bring these concerns and their international implications to the attention of human rights bodies and policy makers, as part of its 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, requires a new vision of tax policy which ensures sufficient, equitable and accountable resourcing of human rights for all, without discrimination.