Those pushing the tax bill now before Congress have a tough job. They have to convince ordinary taxpayers that they should embrace a bill that gives massive tax cuts to corporations and rich people, raises the national debt, results in millions losing health care, and sets the stage for huge cuts in programs, from Medicare to food assistance to education.
Their principal argument — that trickle-down economics is going to bestow jobs and wages on the middle class — is a con job.
Why do U.S. corporations need a tax cut when they already are paying taxes at a lower overall effective rate than in other advanced economies? They don’t.
You probably have heard just the opposite: that our rates are the highest in the world, a skewed view that ignores only the nominal tax rate is higher than most other countries. In fact, myriad deductions and loopholes bring the actual rate corporations pay way down, to below average.
The huge deficits created by this bill — $1.5 trillion over 10 years — would push interest rates up and choke off investment. Furthermore, an examination of developed economies across the globe shows, corporate cuts during the past 15 years have not produced capital investment growth.
Nor is a cut in corporate tax rates going to lead to wage increases. U.S. corporate tax rates were slashed in the late 1980s, and in the years since we have seen the historic link between productivity and wages broken.
Think of it this way: Why would we expect tax cuts now would lead to corporations sharing productivity growth with workers through higher wages? It hasn’t been happening for the past 30 years.
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It gets worse. The bill is supposed to be only $1.5 trillion because there are other tax increases that hold down the total. However one of those offsets won’t work as planned. A minimum tax on overseas profits, which sounds like a good idea, will actually provide an incentive for multinational companies to move American jobs overseas in order to escape the new tax.
Those who want us to believe in the magic of trickle-down economics are trying the oldest tactic in the books: misdirection.
Focus on this shiny bauble — a small cut in your taxes in the short run — and this pie-in-the sky promise of jobs and higher wages; pay no attention to the billions of dollars going to corporations and the rich, and the inevitable cuts in programs, from health care to education to Medicare.
• Peter Fisher is research director of the Iowa Policy Project. Comments: firstname.lastname@example.org