As John Harvey points out in his Forbes article, “The Disastrous Trump Tax Plan”, in order for a tax reform to truly stimulate the economy, it must fulfill two things:
- The tax cuts must not be offset by spending cuts (or tax increases elsewhere).
- The tax cuts must increase the incomes of those who will actually spend the money.
Trump’s Tax Scam does neither.
His article continues that unless more money in the form of tax cuts finds its way into the pockets of the lower 80% of income earners who spend 106% (courtesy of credit cards and borrowing) of their income, cutting taxes on the upper 20% will not be a boon to the economy. Far from it, as the top 20% of will spend, on an average, 78% of their income. And ferret-away the rest in banks and investments rather than buying a set of handcrafted coffee mugs at Maxine’s Knick Knacks on Main Street.
Permanently cutting corporate taxes and expecting the excess profits to “trickle-down” to lift the poor out of poverty or provide higher incomes to the middle class is a fool’s gold. But don’t tell that to Gary Cohn, Trump’s Tax Scam’s huckster who Trump plucked from Goldman Sachs to head the National Economic Council. According to Cohn, reducing corporate taxes from 35% to 20% “…we [will] see the whole trickle-down through the economy, and that’s good for the economy.”
Sorry to bust your boggle-headed bubble, Gary, but we’ve been there and done that “trickle-down” thing before, twice before, and it nearly bankrupted America each time.
Under Reaganomics, “…the national debt nearly tripled, and the U.S. went from being the world’s largest creditor nation to the world’s largest debtor nation in under eight years.”
And, who can forget, September, 2008 when the greed of Wall Street nearly caused our economy to crash under the Bush economic policy of two tax cuts (2001 and 2003), increased military spending on two wars, the housing bubble, etc.?
Trickle-down is a fallacy and won’t work. Mr. Harvey provides a perfect illustration of why cutting corporate taxes does not work: “The reasoning, we are told, is that when we cut corporate taxes they’ll invest and hire more workers. That represents a misunderstanding of the economic factors at work. Take the situation at the mall during the Christmas shopping season. Stores tend to take on more workers. Is this because someone cut their taxes? No, because they expect higher sales. Imagine instead that we cut their taxes but canceled Christmas and all the other gift-intensive holidays. Would firms hire more employees? It’s possible, I won’t completely discount the possibility; but it doesn’t take a PhD to understand that the impact would be minimal. The overwhelming majority of the tax cut would lead to higher profits, and that’s all.”
Tax cuts for the wealthy, including the elimination of the estate tax and reducing corporate taxes will feed the Trump and the GOP beast (and their fat cat donors) without providing us with the additional money we will use to grow the economy. It will also starve the U.S. from sorely needed tax revenue which will lead to spending cuts (Medicaid, Medicare and Social Security?). And, worse, giving the top 1% $1.5 Trillion and corporations a $2.2 Trillion giveaway will trickle-down and burden our children, their children and grandchildren with an unprecedented deficit rooted in “trickle-down” Reaganomics.
$3.7 Trillion? That may buy a whole lot of lipstick but it won’t conceal the fact that the pork is going in the wrong direction.