Tax Cuts Defund the Very Things That Boost the Economy

Dave Johnson

Dave Johnson Fellow, Campaign for America's Future

After eight years of complaining about “Obama deficits,” Republicans are proposing huge, dramatic, unprecedented tax cuts, especially for corporations.

President Trump wants the corporate tax rate cut from 35 percent down to 15, denying the government $2 trillion of revenue over the next decade. He is also proposing dramatic cuts to personal income tax cuts that will especially benefit billionaires like him.

Republicans call corporate tax cuts “pro-growth,” saying they will give the economy a boost. Trump’s Treasury Secretary says the plan will “pay for itself with economic growth.”

So now they’re for “stimulus”?

But here’s the real question: do tax cuts actually boost economic growth?

What Tax Cuts Actually Do

In 2012, the Congressional Research Service looked at data from past tax cuts and the effect they had on the economy, and issued a report titled Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945.  What did the study find?

There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.

In fewer words: There is no evidence that tax cuts bring economic growth, but they do cause income to concentrate at the top.

That may sound bad, but, it’s even worse than that. Tax revenues build roads, bridges, airports, rail and and water systems. Taxes educate the population, conduct scientific research, run the courts, enforce regulations, standardize and enforce weights and measures, and about a million other things that make businesses prosper.

If you cut taxes, over time the business environment necessarily gets worse because those roads deteriorate, people are not as well educated, scientific research declines, courts clog up, regulation enforcement declines, along with about a million other things businesses rely on.

 

If you can’t get educated employees, can’t move goods on crowded and deteriorated roads and your competitors can get away with cheating, your business just isn’t going to do as well as it could.

Tax cuts defund all of those things that boost the economy and make our lives better. Over time the economy necessarily gets worse.

Are Taxes Theft?

Republicans say “taxes are theft.” They say “taxes take money out of the economy.” They say it “takes from those who work and earn and giving to those who don’t.” They say taxation “extracts wealth.”

The idea behind this pithy phrase is that government is illegitimate and “uses force’ to “take people’s money” so “they” can have it instead. They argue there are “producers” and “moochers” and the moochers outnumber the producers and take from them.

These are all actually arguments against democracy. Substitute the words “We the People” for the word “government” in their arguments and you’ll see how this works.

The “they” in their arguments isn’t some “other” person that grabs our money. It’s We the People.

The whole idea of democracy is that We the People govern ourselves, so we’re the ones who decide how to allocate the resources of our economy to make our lives better. How do we allocate our resources? We tax and spend.

Democracy is taxing and spending. And in a functioning democracy, we spend on things that make our lives better.

Are tax cuts theft? Or are they really about theft of democracy from We the People?

I explored the origins of this idea in my 2012 post, Tax Cuts Are Theft:

The American Social Contract: We, the People built our democracy and the empowerment and protections it bestows. We built the infrastructure, schools and all of the public structures, laws, courts, monetary system, etc. that enable enterprise to prosper. That prosperity is the bounty of our democracy and by contract it is supposed to be shared and reinvested. That is the contract. Our system enables some people to become wealthy but all of us are supposed to benefit from this system. Why else would We, the People have set up this system, if not for the benefit of We, the People?

… The American Social Contract is supposed to work like this:

 

… But the “Reagan Revolution” broke the American Social Contract. Since Reagan, the system is working like this:

 

Tax cuts, like the ones Trump now proposes, eat the seed corn of our prosperity.

We’ve been down this road before. We shouldn’t fall for yet another Republican con, this time from the con-man in chief.

***

Reposted from Our Future.

Johnson also is a fellow at the Commonwealth Institute and a Senior Fellow at the Institute for the Renewal of the California Dream. Follow Dave Johnson on Twitter: www.twitter.com/dcjohnson.

Posted In: Allied Approaches, From Campaign for America's Future

Union Matters

Failing Bridges Hold Public Hostage

From the USW

From tumbledown bridges to decrepit roads and failing water systems, crumbling infrastructure undermines America’s safety and prosperity. In coming weeks, Union Matters will delve into this neglect and the urgent need for a rebuilding campaign that creates jobs, fuels economic growth and revitalizes communities.

The Seattle Department of Transportation (SDOT) gave the public just a few hours’ notice before closing a major bridge in March, citing significant safety concerns.

The West Seattle Bridge functioned as an essential component of  the city’s local and regional transportation network, carrying 125,000 travelers a day while serving Seattle’s critical maritime and freight industries. Closing it was a huge blow to the city and its citizens. 

Yet neither Seattle’s struggle with bridge maintenance nor the inconvenience now facing the city’s motorists is unusual. Decades of neglect left bridges across the country crumbling or near collapse, requiring a massive investment to keep traffic flowing safely.

When they opened it in 1984, officials predicted the West Seattle Bridge would last 75 years.

But in 2013, cracks started appearing in the center span’s box girders, the main horizontal support beams below the roadway. These cracks spread 2 feet in a little more than two weeks, prompting the bridge’s closure.

And it’s still at risk of falling.  

The city set up an emergency alert system so those in the “fall zone” could be quickly evacuated if the bridge deteriorates to the point of collapse.

More than one-third of U.S. bridges similarly need repair work or replacement, a reminder of America’s urgent need to invest in long-ignored infrastructure.

Fixing or replacing America’s bridges wouldn’t just keep Americans moving. It would also provide millions of family-supporting jobs for steel and cement workers, while also boosting the building trades and other industries.

With bridges across the country close to failure and millions unemployed, America needs a major infrastructure campaign now more than ever.

 

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There is Dignity in All Work

There is Dignity in All Work